In recent years, renting has become increasingly expensive, particularly since the onset of the COVID-19 pandemic.
While national rent growth has cooled compared to the double-digit surges of recent years, it remains consistent with pre-pandemic levels. In November 2023, CoreLogic reported a 2.7% annualized increase in U.S. single-family rents. But the narrative is more complex in niche markets like the Texas capital of Austin.
Social media posts have fueled speculation that Austin’s rental market is in freefall. Nick Gerli, CEO of Reventure App, claims the city’s median apartment rent has dropped 15% over the past two years. He cites high vacancy rates and rents that are “only 9.8% higher than pre-pandemic levels.”
Gerli told HousingWire in an emailed response that normalizing market conditions would be indicated by a slow and gradual decline in rents.
“What Austin is seeing is not that,“ he said. “Apartment rents have dropped by nearly 15% in two years, which is warp speed for the housing market. What’s more, operating costs for apartment and SFR (single-family rental) operators are up significantly since 2019 due to higher property taxes, insurance, and payroll costs. Meaning that margins are being aggressively compressed.
“Austin fits the classic example of a boom/bust housing market, where a collapse is taking place.”
Austin’s rent prices have seen significant growth since the start of the pandemic. According to Zillow, the city’s median rent across all property types stood at $2,025 as of Nov. 20 — $4 less than the national average.
Clare Knapp, housing economist for the Austin Board of Realtors, counters the notion of a collapse “Austin is not the same Austin as it was eight years ago,” she said.
Data supports Knapp’s perspective. Altos Research reported that the average apartment rent in Austin was $1,695 in November 2024, while single-family homes rented for $2,300 on average.
In January 2017, Altos recorded an average apartment rent in the city of $1,265. And even in January 2020, just prior to the pandemic, average apartment rents were $1,400. By January 2022, they had climbed to $1,612.
The easing of the pandemic in 2021 brought a surge in demand for rental properties in Austin, with vacancy rates plummeting from 7.8% in January to 3.9% by September. As demand soared, so did rental prices, which jumped from $1,289 at the start of 2021 to a peak of $1,725 by August 2022, according to data from Apartment List.
Still, the rental market is adjusting. Knapp notes that Austin saw a surge in active listings during the first half of 2024, providing renters with more options. “The sheer amount of additional supply on the market has really given buyers more of a leg up,” she said.
“I would just say that the rental market is still performing a little bit more strongly than the residential or the for-sale market,” Knapp added. “But, you know, we have seen signs now over the past couple of months that it is slowing. That’s a factor too of higher inventory.”
Knapp said that while the market is finding a new normal, she thinks there haven’t been “changes in a meaningful way” that would indicate doom and gloom.
Function of oversupply
Bryan Lawrence, senior vice president of consulting at John Burns Research & Consulting (JBREC) said that the firm rates Austin’s market as slow — a result of the influx of new supply that’s hit the market in recent years.
“Austin saw nearly 25,000 new apartment units completed over a trailing 12-month basis through the second quarter of this year, equating to 7.9% of existing supply, with another 38,000 of apartment units under construction (12.2% of existing supply) that will be delivered over the coming months,” Lawrence wrote.
JBREC forecasts that rental activity is panning out rather than experiencing massive ebbs and flows, Lawrence added.
“Year over year, apartment rents are down -7.5% YOY (-14% from peak) as of October 2024. We believe rates (including financing rates) staying higher for longer will delay any rebound in construction activity in the near term,” he wrote. “JBREC is not forecasting meaningful rent growth until 2026 and beyond, which will make it harder for new project developments to pencil.”
Carl Whitaker, director of research and analysis at RealPage, said that the oversupply period will be a short-lived phenomenon.
“Using 2017, 2018 as a normal level, delivery should start to look normal by 2027, 2028, so I think the market fundamentals will start to shift pretty soon. And we could be four years from now talking about a market environment where we ask, ‘Are we delivering enough housing?’ again. And I think that that’s a very real consideration,” Whitaker mused. “I think we could be talking about an environment where housing undersupply comes back into the equation.
To say that the market is collapsing may be an over-characterization of what’s happening, Whitaker added.
“Really, what we’re seeing is just that Austin is like a case-in-point example of where you’ve got more than enough supply to satiate demand,” he said. ”And demand in this market is actually still pretty robust. … We see prices adjusting faster in Austin than anywhere else in the country.
“So, I think from that perspective, it is fair to say that there is a tangible drop-off in rent levels. But to say it’s collapsing, I think, is maybe a bit unfair, because it’s still strong.”
Whitaker said that data should drive Austin’s rental market story. Occupancy data, for one, shows Austin at 92.5% occupied — one of the lowest numbers RealPage has recorded since 2010.
“You do have kind of a comparison point there to say, coming out of the great financial crisis [was the] last time Austin saw this much vacancy in the market,“ he said. “But again, from that same perspective, occupancy is actually up about 10 to 20 basis points from the beginning of the year, and vacancy is down about 10 to 20 basis points.
“So, it’s not necessarily ‘normalizing’ relative to a longer-term average, but it is normalizing relative to where it began the year.”
A better way to describe Austin’s market is “stabilizing,“ Whitaker said. He noted that Austin saw a large influx of job-motivated movers post-pandemic, which exacerbated the housing market at that time and caused the city’s employment levels to skyrocket.
“If you drew a trend line from 2019 to today, today’s numbers effectively are where the market would have otherwise been in 2019 had supply and demand, had that pre-pandemic growth rate, carried forward,” he said.
“It’s on par, but it just feels like a jarring adjustment relative to where it was in 2021 to 2022. … This isn’t unique to Austin. This is something we see in a lot of other markets.”