HOUSTON-The two largest multifamily markets in Texas – Houston and Dallas – are “beaten up” from the new supply that has come to market over the past 12 months.

Richard Campo, chairman and CEO of Camden Property Trust, outlined the problems the additional inventory have created for REIT’s properties during its first quarter earnings call. The local company owns interests in and operates 185 properties containing 63,658 apartment homes across the U.S.

“The Texas markets are getting beaten,” Campo notes, adding that they’re suffering from “a ton of new supply” that was constructed during the last part of the development cycle when Dallas and Houston were the only two markets in the country where developers could build. “Unfortunately, some of it is directly competitive with a lot of our assets in Houston and in Dallas, as well.”

Campo notes that merchant builders are offering hefty concessions for the new propeties. He gave this example during the call: every day during his morning commute, he drives by a new apartment community that is in lease up. It has a banner on the side of the building offer three months of free rent.

“That is the kind of pressure that we are seeing on the supply side,” Campo explains. “[Merchant builders are] in a race to get to the finish line from a stabilization perspective, and they’re willing to do virtually anything on rates and concessions to get there. And, it makes for really sloppy execution on anything that is tangential to those submarkets.”

During the first quarter, Camden’s portfolio showed some stress from the new supply – same property NOI declined 9.1% compared to the first quarter of 2009, with revenues declining 4.8% and expenses increasing 2%. Same property physical occupancy levels for the portfolio averaged 93.1% during the first quarter 2010, compared to 93.6% for the same period in 2009.

Campo says the news about Texas isn’t all bad: Dallas and Houston both created jobs during the quarter, the Bayou City at a better rate than the Metroplex. “There’s still an opportunity to work our way out of supply challenges with better job growth,” he says.

And even with the supply challenges, Dallas and Houston are not the REIT’s worst markets – Phoenix and Las Vegas fill those unfortunate positions. “Those markets are clearly still struggling,” Campo says. “It’s not really a supply issue, but the massive job losses.”

Camden’s best market is Washington D.C., which has been a perennial top performer for almost every apartment REIT. “The D.C. metro is unquestionably our strongest market and it seems to be improving,” Campo notes, adding that Denver has also been a “good” market for the REIT. Interestingly, Denver has not been a strong performer for other apartment REITs, given its job losses and housing bubble.