The rental market for houses in Austin is still slowly improving, climbing out of the huge dip we took after the tech bust and 9/11. For October 2009, average and median rents are both up about 1%, but homes are taking longer to rent, averaging 42 days on market compared to 38 a year ago in October.
This is a macro view though. In talking with other property managers in Austin, it’s not uncommon for some homes to be renting for the same or less than a year earlier, while others can do a bit better. It’s really a function of the number of competing homes and the location of the property. It took 45 days for me to rent a central Austin home in 78704 recently and we had to take $50/mo. less than a year earlier. Had I accepted large dogs and/or poor credit, it would have rented right away, so rental criteria is also a determining factor in how long it takes and the amount attainable.
October stats are listed in the chart below.
|Austin Real Estate Rental Market Update October 2009|
|Houses only (condos, duplexes, etc. not included) compiled from Austin MLS data|
|Sep 2009||Oct 2009||Oct 2008||Yr % Change|
|Avg $ SQFT||$0.72||$0.72||$0.74||-2.56%|
|Not Rented %||23.48%||20.39%||27.77%||-26.59%|
Let’s have a look at 2009 year to date through October, compared to the same period in 2008.
|Austin Rental Market YTD Update – Jan-Oct 2009|
|Houses only (no condos, duplexes, etc) – Data from Austin MLS|
|Jan-Oct 09||Jan-Oct 08||Yr % Change|
|Avg $ SQFT||$0.74||$0.74||-1.09%|
|Not Sold %||20%||19%||5.43%|
For the year, the median has dropped a bit while the average remains up about 1%. Remember though, 1% is only $14/mo for the average rental home in Austin. That’s about 1/3 of an average day’s rent, so nothing to get excited about. Days on market in 2009 are much higher than 2008 overall, which drives rents down as owners and property managers drop rents seeking faster rental. For $1,250 rental, it only has to remain vacant and extra 2 weeks to lose all of the additional rent gained over a faster $1195/mo. attempt, so landlords are always trying to find the market rent that will get it rented in an acceptable amount of time.
Finally, below the the history of our rental market average and median prices for rental homes in Austin. We’re still below our 200/2001 peaks rental rates.
As usual, questions, comments and observations are welcome.
5 thoughts on “Austin Rental Market Update – Oct 2009”
What is the avarage amount that a landlord can raise rent. In Los Angeles it’s 3% a year. I hear Austin has no limit. that being said what is usually the avarage a landlord normaly raises. With property tax raising 10% a year on the avarage it could be easy to go cash negative if rents are not raised in small fractions every year. Just trying to get an idea.
There are no regulations controlling how much a landlord can or cannot ask for rent or rent increases. It’s whatever the market will bear. I generally look at the market value when sending renewal letters and offer the tenant a renewal rent based on market conditions.
The market is ignorant of and unconcerned with our carrying costs as landlords. It’s foolish to let a good tenant move out over a rent increase, then find that the home won’t even rent for as much as the former tenant was paying, so I think, in most cases, turnover avoidance should be a landlord’s number 1 objective rather than trying to inch up on rents. I’d much rather lease a good tenant at current rent, or accept a small increase, rather than indur the expenses of a turnover.
Agreed completely with Steve’s points above. There will always be turnover no matter what you do, especially in our case where we rent in a submarket dominated by students, so there will eventually be opportunities to catch up to market value – but the worst thing you can do is shoot for +100 and end up with an empty unit for a while.
I totally understand. And I am not in this for positive montly possitive cash flow and I have accepted that I may not break even.. Just get a little nervouse doing the figures trying to figure out the unpredictable tax increase, and how that will affect how much money I’m loosing every month. So I was wondering is it better to raise the rent a little every year by 15$ – 20$ or raise it in one chunk by $100.
My personal observation has been that anything more $50 increase once a year triggers negative reaction from tenants. Something about the $50 threshhold causes protest, whereas $50 even, or less, seems fair to the tenant
I just had a move-out yesterday of one of my own properties. Tenant was paying $900/mo and the market rent (what I am renting the same unit for next door) was $1,000. But my tenant stayed for 8 years. Original rent was $695, so I only went up an average of $25/yr.
Figuring the average rental turns over every two years, and costs on average 3 month’s rent in vacancy loss, repairs, makeready, etc., that’s $12K ($3,000 x 4) that I’ve avoided in expected turnover in 8 years. And let’s say I lost an average of $50/mo. in below market rent for the entire 8 years. That would be $4,800 substracted from the $12K, but I’m still ahead $7,200.
keeping rents slightly below, or right at market value provides a better chance for a long term tenant. Long term tenants are more profitable than higher paying tenants who move often.