In her latest market commentary, Fannie Mae's Kim Betancourt takes a look at the new-construction pipeline and its implications for those markets where cranes are swinging left and right.
The busiest metros include Houston and Dallas, as well as Washington, D.C., and New York City: The latter has more than 100,000 units being built, while the first three have over 30,000 in the pipeline, with Denver, Seattle, and Boston close behind.
But all of this activity comes with a heavy price, especially in Houston as it struggles to regain its footing from declining oil prices.
A combination of low oil prices and a weaker than expected local economy are decreasing demand for rentals at the same time as deliveries of new units are surging. This suggests that the metro is in for a period of rising vacancies, declining rent growth, and even possible rent contractions.
... Austin [Texas] is also [worrisome]. The vast majority of its new stock is for millennial high-tech workers who want to live downtown. But some of the new jobs the local economy [will] generate in the next few years may not be in the high-tech sector and may not pay enough to support Austin’s escalating asking-rent levels. As a result, its apartment market is expected to see some volatility ... .