Austin Apartment Owners: Challenges in 2010

While we’re relatively comfortable in the campus market - high occupancy, stable prices, and quick turn each August are the name of the game - the Austin, TX apartment market has experienced some significant changes as the economy has shifted over the past two years. According to a recent article from the Austin Business Journal, many Austin “Class A” apartment owners (this is virtually all apartments in the campus area as well as countless others around Austin) are going to face operational and financial challenges during the first half of 2010. Read more to find out about the difficulties that they will face, learn more about the market for homes, condos, and apartments in Austin, and get a sense for how these changes in the rental market will affect the average renter.

According to Marcus & Millichap Real Estate Investment Services, the increasing affordability of new and resale homes available in Austin will likely impel many renters in Austin to buy homes in the coming months as opposed to renting. This is especially true now that the $8,000 Tax Credit from FHA has been renewed and extended into 2010, and given that the economy, though far from fully recovered, has continued to show steady signs of life amid this tough recession. And the glut of new apartment units that have come on line this year is also giving potential renters more options - the UT market in particular has seen a large number of corporate apartments enter the market during the past three years to add to the overall inventory primarily composed of homes, condos, and apartments in neighborhoods such as West Campus, North Campus, Hyde Park, and Downtown. On the positive side, the report said, the area’s long-term economic forecast is among the strongest in the country, and the vibrant local economy will continue to lure job-seekers to Austin even amid tough market conditions through the rest of the country. Further, Class B and Class C demand shifting towards higher-end units could mean that Class A occupancy will stabilize somewhat in the first half of next year.

From Austin Business Journal:

“While local buyers recently have been taking a more active role than their out-of-state counterparts, some California money has begun to trickle back into the market,” the report said. “Through the end of the year, however, local investors will be the primary purchasers in Austin, employing cash acquired before the surge in 1031-exchange activity drove down cap rates a few years ago.” The report said that trend will likely increase the average deal size, as investors who had targeted smaller properties to avoid competing with out-of-state buyers can negotiate better terms for larger complexes. It also suggested that demand among cost-conscious renters in submarkets adjacent to the city’s core will make those areas attractive to investors in the coming months. So far this year, builders have added 7,370 units to Austin’s apartment inventory, the report said, a 5 percent increase. In cities surrounding Austin, apartment construction has still be going strong. Developers are expected to add nearly 2,600 units in the Round Rock and Georgetown submarket this year, the report said, a 28 percent increase.

For more information about UT Austin Real Estate or any other Austin Real Estate, please check us out online. We’re your information source for UT Austin real estate, West Campus property, North Campus property, and property management. To get connected with an agent immediately, call 512.472.9378 or email info@westcampusliving dot com.

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