At my monthly Property Manager’s luncheon yesterday in Austin, the general consensus among the 30+ property managers in attendence was that the leasing market has taken a nose dive since September. The number of renter calls has really slowed down. One manager remarked “I keep calling my own phone to make sure it’s working”.
Indeed, the Rental market seems to have slowed down, but the market stats don’t make that obvious. You’ll just have to take my word on it. So treat this prelude to the stats report as an asterik, noting that some homes are in fact leasing slower and for less money than a year ago, even if the general overall stats for October seem to be as good or better than a year ago.
So, let’s take a look at the October stats below, and notice that the average rents in Austin are up 3% over October last year. Median rents are the same, which is common for rentals, as the median doesn’t move often. Days on market look good at 31 average and 23 median. The average and median prices per square foot , however, are down. This is more in line with what the leasing agents and other property managers are reporting. The number of expired lease listings is up and the number of withdrawn listings has more than doubled from a year ago. See the chart below.
|Austin Real Estate Rental Market Update|
|Homes only (condos, duplexes, etc. not included) compiled from Austin MLS data|
|Sept 2008||Oct 2008||Oct 2007||Yr % Change|
|Avg $ SQFT||$0.74||$0.73||$0.70||5.25%|
|Not Rented %||26.90%||28.07%||19.64%||42.92%|
So in a market in which the phones are not ringing and inventory is building (from failed For Sale properties being converted to rentals), price drops and incentives are the only cure (assuming there are no condition issues). I had a house listed at $1,395 with ZERO showings for 1 month. We dropped it to $1,275 (for the first 6 months), which represents a $720 rent incentive, and it leased immediately thereafter. That $720 is equivilent to 16 days of vacancy at $1395, so as we approach the current tenant’s move-out date at the end of November, we had to get more agressive.
Below are the year to date leasing stats for Austin 2008 through October compared to 2007 Oct YTD.
|Austin Rental Market YTD Update – Oct 2008|
|Homes only (no condos, duplexes, etc) – Data from Austin MLS|
|Jan-Oct 08||Jan-Oct 07||Yr % Change|
|Avg $ SQFT||$0.74||$0.71||4.15%|
|Not Rented %||19%||16%||20.23%|
Note that the year to date improvements are much greater than October alone, which tells us that October was a much weaker leasing month than the prior months of 2008, and that the market is slowing down disproportionately to what we’ve experienced through the Spring and Summer 2008, compared to 2007. In other words, 2008 looks like it will be another up year, but some of the Spring/Summer strength is going to be eroded as we finish the year.
The graph below shows where the Austin rental market is with respect to its historic patterns. The graph tells a self explanatory tale. The rental market in Austin tanked after 9/11, and didn’t start upward again until 2006. We are still experiencing a slow climb up, but notice that our 2008 average rental rates are still lower than the rental rates 7 years ago.