Austin rent prices drop as city sees flood of new apartments

Austin, Texas, led the nation in dropping rent prices for the month of June, according to a new report from Realtor.com.

The South generally saw a surge in housing units as more builders target the area because of mass migration post-pandemic.

After Austin’s year-over-year rent drop of 9.5 percent, San Antonio, Texas, and Nashville, Tennessee, also saw significant rent price decreases of 8.2 percent and 8.1 percent, respectively.

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“It’s difficult to know just yet if this is simply a trend or a long-term slide, but markets that were white hot during the pandemic like Austin and Nashville are experiencing a deceleration in demand,” Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, told Newsweek.

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Beene said the boom in remote work has regressed, and many workers have had to relocate back to their home office, which for many is outside of the southern cities they migrated to during the COVID-19 pandemic.

Realtor.com also attributed the drops to substantial increases in the supply of new rental units.

“To meet that demand, suppliers needed to come into the market and have now oversupplied the market with housing,” Kevin Thompson, a Texas-based financial expert and founder of 9i Capital Group, told Newsweek. “What you are seeing now is the natural market forces finding an equilibrium price, which will naturally fall, especially when you compare them to year-over-year numbers.”

Nationwide, rents fell 0.4 percent year-over-year in June, marking the 11th consecutive month of rent drops nationwide. The median rent for a studio to two-bedroom unit in the top 50 metro areas was 21.2 percent, or $305 higher than the same month in 2019.

“Rents have been steadily falling for almost a year, though the pace of the decline has slowed,” Danielle Hale, chief economist at Realtor.com, said in a statement. “But rental costs have risen significantly since before the pandemic and inflation has further strained renters’ budgets, underscoring the need for more supply to meet demand and to keep renters from contributing an increasing percentage of their incomes to housing costs.”

The pandemic saw the housing market become severely disrupted, with some markets like Tampa and Miami in Florida seeing rents skyrocketing by up to 40 percent. Tampa and Miami still have some of the fattest rental-price growth versus their pre-pandemic levels, with Tampa up 39.5 percent and Miami 39.2 percent.

Beene said that in comparison, smaller metropolitan cities like Austin have smaller suburban areas that ultimately offer cheaper rents and even mortgages.

Austin also saw the number of homes for sale to climb by 26 percent to 13,227 active listings, according to the Austin Board of Realtors.

“As these markets continue to mature and have states that are seeing economic growth in all areas, it’s natural to see people reassess their living options,” Beene said. “If you can save a few hundred dollars in rent by driving to work 30 minutes each day, you usually do it.”

Thompson said that while the remote work age might be coming to a close, many workers will fight against it and could potentially come back to the city as housing prices become more affordable.

“Austin and other areas that have experienced substantial growth will likely see those growth rates decline to more sustainable levels,” he said.