According to IPA’s Texas multifamily construction special report, apartment construction starts in Texas sharply slowed in the second quarter of 2023, down 72% from the quarterly average recorded from the beginning of 2021 through 2023 first quarter when project starts were at their peak.
“Apartment construction starts in Dallas-Fort Worth, Houston, Austin, and San Antonio plunged to 6,500 units during second quarter 2023,” states Greg Willett, first vice president and national director, Research Services, IPA. “Over the previous nine quarters, the start volume averaged 22,800 units.”
In the second quarter of this year, starts totaled 1,400 units in Austin; 3,200 units in Dallas-Fort Worth; 1,100 units in Houston; and 700 units in San Antonio. These starts compared with first quarter 2021 through first quarter 2023 were down 74% in Austin, 79% in Houston, and 67% in both Dallas-Fort Worth and San Antonio.
“It is important to note that the pullback in building can accelerate the pace of rent growth as early as spring 2024,” adds John Sebree, senior vice president and national director of the firm’s Multi Housing Division. During the first half of 2023, renter demand absorbed over 17,000 apartments in the major markets, rebounding from last year’s net move-out.
IPA states that “strengthening sentiment and household formation could further bolster absorption, spurring more notable rent growth as early as the spring 2024 leasing season, when it will be more obvious that future supply is being reduced.” Most recently, rent growth above the long-term norm seems likely to return in early 2025, IPA cites.
While starts have dropped drastically, ongoing construction is still near all-time highs as 174,700 units are underway across Austin, Dallas-Fort Worth, Houston, and San Antonio, accounting for approximately 17% of all units scheduled for delivery nationally.
Dallas-Fort Worth’s 72,900 apartments under construction are the most in the country and will grow the North Texas market’s inventory by 8%, the report notes. The northern edge of Dallas-Fort Worth is the most active building area in the state with roughly 10,400 apartments under construction in the Allen-McKinney submarket and about 8,600 in the Frisco submarket.
Considering it takes 18 to 24 months to complete a typical Texas apartment community, deliveries could begin to pull back in early 2025 and drop notably during the last half of that year.