The rental market for single family homes in Austin continues its march upward. Rent prices increased about 6% in 2008 over 2007. Remember though that the 2008 average rent amount of $1,424 per month in Austin is still less than the year 2000 average rent of $1,497/mo. and the year 2001 peak of $1,524/mo. The graph below shows the historic average and median rent values for Austin from 1999 through 2008. The big dip you see in the chart is a result of the tech bust, 9/11 and the resulting job losses, weak economy and over-supply of rental homes that resulted in all the failed sales efforts from 2002 through 2004. You can see that our rental market bottomed out in 2005 and turned upward in 2006 and has continued that trend for three years now. But most rental homes in Austin still rent for less than they did in 2000 and 2001, so renters have had a good run.
Will the Austin rental market continue its upward climb in 2009? It’s hard to know for sure, but I think it might level off a bit for 2009. Demand for rental homes will increase due to the non-buyers who are choosing to not buy a home and instead becoming or remaining renters. But that is offset by the slower job market, and the increased rental supply provided by sales listings converted to rentals after not selling, as those sellers refuse to lower the price further and instead decide to simply hold off on selling for a year or two until the sales market rebounds. Also, although the rental stats look really good for landlords, those of us in the business of renting properties know that we are not always able to increase rents and not all homes rent as quickly as the stats suggest.
Finally, apartments are over-built again in Austin and there will be a large number of just completed new apartment units coming online in Austin in 2009, as well as new condos converted to rentals due to slow sales. The move-in deals and concessions offered by apartments tend to siphon away at least some of our home renters who ordinarily might not consider an apartment but can be swayed by economic incentives such as three month’s free rent, $99 deposits and free washer and dryer. So, while demand will increase, supply will be increasing by even more.
I just mailed lease renewal notices out for 4 rental properties I manage, and we did not raise rent on any of those particular properties. It’s much cheaper and more prudent to retain a tenant at the current rental rate than to cause them to think about moving because of a $50 or $100/mo rent increase.
December rental stats, Year to date rental stats, and a breakdown comparing 2008 to 2007 by MLS area are all posted below.