Austin, Texas’ multifamily supply trajectory serves as a good microcosm for the broader national landscape, says Carl Whitaker, chief economist at RealPage. While more multifamily supply is on the way for Texas’ capital city this year, the peak is in the rearview mirror.
Last year, 30,953 new market-rate units were delivered across the metro.
“To put that number into context, that means for every 100 apartment units that existed in the area at the start of 2024, another 10 were delivered in the past 12 months,” Whitaker says. “And while 2024 was indeed the peak, it’s important to note that more than one-third of the entire Austin market has been added since the start of 2020 when there were fewer than a quarter of a million apartment units in the market (versus 336,000 today).”
2025 will be another big year of supply with 16,800 new units scheduled to deliver. If not for 2024, it would have been the metro’s largest calendar year since the 1980s.
“It will still be a remarkable year for metro Austin, but the year-over-year comparison is striking. By summertime, local operators will begin to see some of the impacts of the supply drawdown,” he says.
Strong job growth with continued domestic migration are factors benefiting the market. However, Whitaker adds an understated factor that works in favor for the market is the young population base, with the median age of 35.9. He says the young population “is ultimately a reflection of the character of the market, which is still known for its quirkiness, supported in part by its large university population.” In addition, the university provides a strong pool of potential employees to pull from, providing incentives for more corporate relocations.
“The tide of supply is shifting quickly, and assuming that demand holds steady, then the proverbial light is at the end of the tunnel for local operators,” he says. “It’s important to remember that the Austin market hasn’t faced many—if any—sustained demand challenges since the Great Recession. So, there’s little doubt that Austin will struggle on the demand side moving forward, and we now know that the supply side is going to start easing sooner rather than later.”
According to RealPage, rents are forecast to decline another 5% through 2025; however, occupancy is showing signs of stabilization, reaching 93% in the first quarter—the first time since fall 2023. Once occupancy climbs further, rents also will begin to grow again. RealPage forecasts occupancy should improve to over 94% by the end of the year.
Whitaker warns that the prolonged period of negative rent change the metro has seen will cause more forced sales this year.
“Austin could be a market where distressed assets come up for sale a higher frequency than many other markets across the nation. At the market’s peak in third quarter 2022, market-wide rents averaged $1,716. Today, rents are down to $1,461, equal to a 15% drop from that peak figure,” he notes. “There are potentially assets that will have seen a full three-year period in which rents haven’t grown at all. That negative net operating income in turn is affecting asset prices, meaning that some investors are upside down on their investments in the market.”
He adds that this won’t be true for all assets, and well-capitalized investors who have been through down cycles previously will be better equipped to weather the storm.
