Half the Lone Star State’s Submarkets Have Cut Apartment Rents

Everything’s bigger in Texas, or so goes the adage. And it’s true when it comes to rent cuts leading to price declines, as of this July, according to RealPage.

Of the 113 submarkets across the state’s largest markets, 53 cut rent in the year ending in July, a big uptick from the year ending a month before in June when only 24 did. The report concluded that the city is “currently in correction mode, after operators raised prices significantly in the past few years.” Some of the rent hikes had reached between 20% and 30% in 2021 and 2022, so the market is now adjusting.

Austin, the state’s capitol, experienced the most submarket cuts, and only one–San Marcos–had rent growth in the past year with a small blip upward of 1.1%. The reason is that it has had good traffic because of the large population of students at Texas State University, which has an enrollment of more than 37,000 students, making it the fourth-largest public university in Texas.

A big chunk of the asking rent cuts in Austin hit almost all or 15 out of its 16 submarkets or 94% saw rents slashed. The area’s deepest cuts of 7.2% were in the Northwest area with Cedar Park just behind with a 6.6% decline. Annual price cuts of about 6% were also experienced in Far West Austin, Southwest Austin and the Arboretum.

And how is demand faring in light of the cuts? It remains solid, the report said, and the city ranked fourth nationally for its fast growth. The city has also seen a lot of new deliveries, more than it can absorb in the near term. As of July, annual completions were at almost 13,300 units, increasing the base by 4.6%. And another wave of 32,000 units are projected to be completed in the coming year, which may lead to more rent cuts.

Other Texas markets that saw rent cuts included Dallas-Fort Worth where 42% of its submarkets had cuts; San Antonio where the percentage with cuts was 72; and Houston where 23% had cuts. Some submarkets saw deeper cuts than others. For example, price declines were deepest at 2.5% in Northeast Fort Worth/North Richland Hills and Central/East Plano. However, some Dallas submarkets saw strong rent growth such as Southeast Dallas with a big increase of 9.9% in the year ending July. Growth was also strong at 6% to 8% in Northwest Dallas, Hunt County and Southwest Dallas.

Where were rent cuts smaller? In Houston where out of 35 neighborhoods, only eight of its submarkets had price declines in the last year, which reflected 23% of its market. One of its submarkets of Sharpstown/Fondren Southwest had one of its best rent growth showings in the state at another big 9.2% in the year ending July.

But all in all, the report reported that the state shouldn’t be thought of as failing. Its employment base remains a strong demand driver, representing 20% of all job growth nationwide in the year ending May and its domestic population growth continues to hit historic levels. The conclusion is that rent cuts aren’t expected to continue for long.