The number of single family homes rented in March 2006 increased a whopping 65% over March 2005. 633 Single Family Homes were leased through the Austin MLS Leasing service this March compared to 382 units in March of last year. This impressive increase in absorption is surpassed however by the even greater increase in supply. One word – Investors.
As I do this rental analysis each month, I keep waiting to see an upturn, as we are seeing in the sales market. But it ain’t happenin’ yet. Even though the numbers are being stretched to the point of almost not making sense, investors who are bullish on the appreciation potential of Austin’s residential home market still see plenty of good opportunity in purchasing rental homes in Austin. But when an investor asks me “how’s the rental market in Austin TX”, I say “you’re getting ready to make it a little worse”. See the chart below.
| Austin Rental Market March 2005 and 2006 Single Family Homes |
||
|---|---|---|
|
Mar 2005
|
Mar 2006
|
|
|
# Homes Leased
|
382
|
633
|
|
Average List Price
|
$1221
|
$1195
|
|
Average Leased Price
|
$1218
|
$1182
|
|
Average Days on Market
|
62
|
64
|
|
Average Size (square feet)
|
1788
|
1804
|
|
Average Price per Square Foot (monthly)
|
$0.68
|
$0.66
|
As you can see, average list price is falling, average leased price is falling, days on market went up slightly, and average price per square foot is falling. This doesn’t mean that this is happening in all areas of Austin. We continue to advise investors to stay out of starter-home neighborhoods that are selling new homes. New homes are OK to consider in the right areas in the $250K+ price range, but the newbie investors flock to the cheap stuff and then they don’t take care of the properties and thge neighborhoods suffer. We still like newer homes in areas that are substantially built out and we like older homes in mature neighborhoods closer to downtown.
If you’d like more information about investing in Austin Real Estate, Call me at (512) 301-5811.
Can you give me the same rental statistics for the newer downtown condos like 555, Plaza Lofts, Nokona, Austin City Lofts, etc? Thanks!
Leon
Hi Leon. The sample size for downtown condos is too small to do the type of broad analysis we can do with single family homes in Austin, but here are some numbers.
In the first 3 months this year, in the 78701 zip (downtown), 9 of the newer (built 1999 and later) condo/loft units have leased for an average of $1942/mo, which is an average of $1.77 per square foot.
But 25 units have expired or been withdrawn in the same time period, so the market is not absorbing these units very well currently. Right now there are 4 units at 555 for lease at an average price of $2625 per month for a 998 square foot 1/1 with a garage. There are few people looking for something like this compared to a 3/2/2 home in a residential neighborhood.
Downtown condos/lofts are more speculation than investment. It take the right kind of investor to put money into these. The rewards could be higher but so is the risk. We stay away from them, not because I think it’s a bad idea, but because it’s safer sticking to bread-and-butter rental homes where the variables are easier to control and predict.
How is the downtown rental market right now in light of the credit problems. What should I expect to pay per sq ft?