Is Austin Really That Cheap? Surprised At Rental Rates (Houston: for sale, apartment)

[CptnRn]

The recession badly hurt the new housing construction industry, so few new houses are being built. Meanwhile thousands of people continue to move to Austin every year, so apartment occupancies are at an all time high and will probably stay that way for a good while.

[OpenD]

Originally Posted by passionatearts

Rental supply is extremely tight right now, and that's driving up prices. The tight supply is due to several factors: lack of apartment construction over the last 5 years due to the recession, high numbers of transplants moving to Austin, and the wildfires of last year which destroyed a large amount of housing stock in the Austin metro area.

And you can add, a large number of people being forced into the rental market due to foreclosure and eviction from their homes.

The latest figures show Austin's rental occupancy rate at 96% right now, so all the rents are high. Even studio apartments are running $100/mo higher than they did last year.

[EzPeterson]

Originally Posted by OpenD

And you can add, a large number of people being forced into the rental market due to foreclosure and eviction from their homes.

The latest figures show Austin's rental occupancy rate at 96% right now, so all the rents are high. Even studio apartments are running $100/mo higher than they did last year.

Eh, I wouldn't be so quick to jump on the foreclosure piece as a contributing factor - only 1 in 3100ish homes is in foreclosure in Travis county, about 20% of the national average of 1 in 600.

But rents are way higher. 5 years ago, I was renting a place off 620 for $700/mo that they're getting $1150/mo for now.

[Exiled Texan]

Originally Posted by sxrckr

The cheapness of Austin, and the popular/desireable cities [areas] in Texas for that matter as you've discovered, is exaggerated.

Agree 100% with bracketed edits.

[supernaut112]

Originally Posted by MysticalDream

What, I would like to know is if there is something I am missing? Where and what is the cheap housing in Austin I keep hearing about? I've looked at other supposedly cheap Texas cities, and I have noticed the prices are not all that low either, but lower than Austin.

Keep driving north/south/east/west away from Austin, and you'll find what you're looking for. Generally speaking, the further away from Austin proper you are, the cheaper the rent.

I grew up in a smallish town that many people now refer to as part of "North Austin." It really isn't, but if it makes people happy to think they're living "in Austin," then whatever. There are a lot of nice, spacious homes for $900 or less. Caveat: It's an hour-and-a-half drive from Austin on most days of the week.

[riaelise]

There are no "large houses" in the suburbs that are $900 / mo. I live in northern Pflugerville, and generally everything is $1100+ (for the smallest homes in the neighborhood).

[mark311]

Originally Posted by riaelise

There are no "large houses" in the suburbs that are $900 / mo. I live in northern Pflugerville, and generally everything is $1100+ (for the smallest homes in the neighborhood).

Agreed. The rental occupancy rate theory is interesting, but it just doesn't make sense for single-family homes to rent at that $900 price point because the landlord couldn't even break even on the mortgage payment/property tax/homeowner's insurance/maintenance costs. You're just not going to find homes worth under $130K and the Austin suburbs are too new to have a lot of people with rental homes that are already completely paid off with no mortgages.

If the rental occupancy rate drops down to 75% for some reason, will all the landlords be fine with losing $400 per month to keep a rental property or will they just sell it at that point? Not being able to rent a large home for $900 per month is due to value of the homes and not the occupancy rates.

It sounds like EZPeterson was getting an incredible deal on a single-family home for $700/mo off 620. The landlord was probably losing money on that deal.

[OpenD]

Originally Posted by mark311

The rental occupancy rate theory is interesting, but it just doesn't make sense for single-family homes to rent at that $900 price point because the landlord couldn't even break even on the mortgage payment/property tax/homeowner's insurance/maintenance costs.

Although that's logical, in real life it is not always the case. I know several people who are taking a monthly loss on properties they own, due to some circumstance or another, like renting it now because they can't get the sale price they want at the moment, or because they're holding it as a long-term investment, or even holding it for a child to live in later.*

Rental rates are subject to market pressures and market swings. Landlords wind up responding to those swings even if occasionally prices are too low to break even.

*Edit: Just remembered another... friend bought a house to retire to some day, currently lives elsewhere, rents the house out in the meantime, prices it per the market, not always above break-even. But he's building equity long-term.

[CptnRn]

Originally Posted by riaelise

There are no "large houses" in the suburbs that are $900 / mo. I live in northern Pflugerville, and generally everything is $1100+ (for the smallest homes in the neighborhood).

When I first put our 1300 SF house into the rental market in 2003 we surveyed the market prices in the SW part of town and set the rent at $1050/month which includes yard maintenance services. This year we raised it to $1300.

[mark311]

Originally Posted by OpenD

I know several people who are taking a monthly loss on properties they own, due to some circumstance or another, like renting it now because they can't get the sale price they want at the moment, or because they're holding it as a long-term investment, or even holding it for a child to live in later.*

Good points. I do think that these reasons would be considered exceptions and not the standard. I personally don't know how people can handle having a negative cash flow on a rental property unless it's in an area with a lot of future promise (rapid gentrification for example), but I know that people do it. I certainly wouldn't be lining up for that type of deal in a far out suburb.