When rents and occupancy are both moving up as they did in Austin in June, the apartment market is strong. The result is an increase in pent-up demand for home purchases as the cost of renting draws closer to the cost of buying. The higher and faster rents increase, the more people will opt to look at buying as a more financially sound decision. More importantly, the start of new rental projects shows that lending for that type of project has finally opened up after being very tight for the past 4 years.
LENDING ACTIVITY INCREASES
Not just in Austin, but throughout the country, obtaining bank financing to construct a new rental community was very difficult. The recent flurry of activity in our area, as announced in a recent Austin American-Statesman article, is indicative of the recent availability of funds. Any bank financing of development projects is a good sign that confidence in that sector is returning. Remember, new construction of any type is very positive for the local economy as the dollar bounces 7 to 9 times, according to Mark Sprague, Director of Business Development here at Mission Mortgage and a well-regarded expert in the housing market.
OCCUPANCY AND RENTS ARE RISING
Occupancy rates in Austin have hit 96% and may reach 97% by the end of the year. Only two new communities brought properties to the market in the first half of 2011 and there are only three more that will be completed by the end of the year, with just 839 units being built. Experts predict 10,000 to 12,000 new units will come on the market over the next year, which would be a significant increase over the 7,000 – 8,000 we see in a healthy, growing local market. Until new units become available, however, the market will continue to get tighter, leading to higher occupancy and higher rents.
Rent prices per square foot across the Austin region increased 6% in the first six months of this year to $1.04 per square foot. Higher demand and limited supply leads to higher prices and the rental market is no exception. As more jobs are created in Austin, more people will move here to fill those jobs, leading to more demand while supply dwindles. Those who are currently renting should expect their rents to increase the next time you extend your lease.
BUYING IS BECOMING MORE ATTRACTIVE
With mortgage rates at all time historic lows, purchase inventory down, and rents on the rise, now is the time for renters to check the value of renting versus ownership. With the tax incentives of home ownership and the stability of payments in the future, owning is quickly becoming more and more attractive, especially to those who have never owned before. If you are considering your first home purchase and would like to speak with a mortgage professional, please give us a call at 512.328.0400 or email us at firstname.lastname@example.org for a personal home buying consultation.
To read the complete Austin American-Statesman article, click here.