Austin Rental Market Update – March 2009

Average rents in Austin have taken a slight dip for the first quarter of 2009. The number of rented homes is up 11% over the same three months a year ago, no doubt due to the fact that many sellers are opting to rent instead of dropping prices below their bottom dollar. This creates additional rental inventory, which gives renters more homes to choose from, and prevents prices from increasing.

Personally, I’ve leased 4 or 5 homes in the past 2 months, and the market is really spotty. One house I leased central received 4 applications in 2 days. Another one I leased north central leased immediately for $1,650 a year ago, but took about 45 days to lease for $1,595 this year. Another one in Western Oaks leased for $1,550 (same amount as last year) in about a week. A different home in Western Oaks, also listed at $1,550, and newer and in better condition, has not received any showings in more than a week. It’s not an easy market to predict right now, much like the sales market. 

The stats chart is below, followed by the 1999-2009 Austin leasing history graph. 


Austin Real Estate Rental Market Update Q1 2009 Jan-Mar
Houses only (condos, duplexes, etc. not included) compiled from Austin MLS data

Oct-Dec 2008 Jan-Mar 2009 Jan-Mar 2008 Yr % Change
# Rented 1878 1979 1782 11.05%
Avg List $1,407 $1,382 $1,393 -0.79%
Med List $1,250 $1,225 $1,250 -2.00%
Avg Rent $1,390 $1,364 $1,384 -1.45%
Med Rent $1,225 $1,200 $1,225 -2.04%
Rent/List % 98.79% 98.70% 99.35% -0.66%
Avg SQFT 1934 1930 1919 0.57%
Med SQFT 1794 1798 1799 -0.06%
Avg $ SQFT $0.72 $0.71 $0.72 -2.01%
Avg DOM 42 50 41 21.95%
Median DOM 33 40 29 37.93%
# Expired 293 206 183 12.57%
# Withdrawn 513 458 350 30.86%
Not Rented 806 664 533 24.58%
Not Rented % 30.03% 25.12% 23.02% 9.12%


As noted in the chart above, average rents in Austin (for single family homes) are $1,364/mo., down 1.45% from $1,384/mo. the same quarter 2008. Median price has fallen from $1,225 a year ago to $1,200 this year, meaning half of all homes in Austin rented for $1200 or less. 

Below is a graphical representation of the Austin rental market from 1999 through March 2009.

See what happened (below) after the tech bust and 9/11, back in 2001? We are not going to see that sort of dip, but I think we might be flat this year before prices keep rising next year. One thing we have working against us in the residential leasing of single family houses in Austin is that the apartment vacancy rates are rising and will continue to rise this year due to over building of new apartments. That will create move-in specials and incentive deals offered by the apartments that siphon away our house renters who normally would not want an apartment. 


Note above that renters are still paying less in average rents than they were in the year 2000. That’s really amazing. Renters have had it good in Austin for many years now.

I was going to write more about the typical sales/rent price ratios seen over time (1%) compared to what we see today (0.7%), but it’s turning into an entirely new topic as I work on the graphs, so I’ll end this one here and invite you to subscribe to the Crossland Team blog to stay current on Austin real estate market stats and other related stuff.

As always, comments and questions are welcome.

6 thoughts on “Austin Rental Market Update – March 2009”

  1. Steve, When you talk about Sales/rent price ratios, are you referring to annual rent or monthly rent. Say a $100,000 property that rents for 900/mo, would this ratio be 11 (100000/900) or 9.2 (100000/10800 or do I need to be looking at Rent/sales price for annual of .9% (900/100000). I have heard of this metric before but never have understood what the “standard” is. I imagine rent price/sales price are higher in Texas vs other states for cashflow properties becuase of the higher property tax rate. Look forward to seeing your analysis on the historical trends of this ratio over time. Thanks for the stellar blog, I read it all the time! -Dave

  2. Hi Dave,

    I divide the monthly rent into the market value of the home. For example, if a $120,000 home rents for $1200/mo.m the ratio would be:

    1,200 / 120,000 = 0.01, or 1%.

    At present, in Austin, you have to pay about $150,000 for a home that will rent for $1,200/mo. So the ratio is 0.008, or 0.8%.

    So, when I talk about investors “chasing cash flow” out into areas like Hutto, Manor, Kyle, etc., they do it because the ratios out there are better than the ratios in South Austin.

    I own homes in Leander that rent for $1275 and would sell for about $145K. That would be an 0.88% ratio.

    It’s just a form of gross rent multiplier, though many do use annual rent divided into market value, which give GRM of around 9 to 11 in Austin for the typical rental stock.

    Stay tuned. The graph is looking good and I’ll post it either today or tomorrow.


  3. Steve,
    How do you compare 2000 to now?
    Rent was crazy in the Dot Com days. At least the rent was crazy for San Francisco.

  4. Any city experiencing tremendous population growth generally outwards into former suburbs and fields will likely have stats for the entire city that show average rents flat to slightly up. That makes sense mathematically since as the city grows outwards the proportion of distant rentals increases relative to more expensive closer in rentals in a squared law relationship. If you consider rents in desirable close in neighborhoods then I personally know they have been increasing every year on average with the one exception of the dot com collapse year.

  5. > I personally know they have been increasing every year on average with the one exception of the dot com collapse year.

    Hi Ray. Thanks for the comment. In fact, rents did fall in all areas of Austin for 4 or 5 years. No area was immune. I don’t have the stats handy, but I do know we had homes in Central Austin that rented for $1800 in 2000/2001 that were renting for less than $1500 in 2003/2004. So, the stats will not support your notion.

    I do agree with you that the outskirts tend to skew the total stats downward.


  6. Regarding sales/rent price ratios, I wonder if interest rates need to be factored in to “normalize” this ratio. You would imagine that the COST of buying a house vs the rent ration might hold steady while the SALES price vs rent price might be increasing. Interest rates have been trending downwards, also, I understand that texas property taxes have been go down percentage wise (is this correct?).

    Here in San Diego many believe that rents will be starting to decline. They have been steadily increasing the last several years but now when you look at the cost to buy vs. cost to rent it is much cheaper to purchase many SFH and Condos when compared with renting. I believe that in certain segments of our market housing cost is definately undervalued when compared with rents (meaning rents could be on the way down, at least when you adjust for inflation).



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