DFW rents were 6.2 higher last year, averaging $919 per month, but demand still soared, with North Texas leading the nation in apartment rentals, and vacancies at a 13-year low, according to new real estate research from Zillow and MPF Research.
The increased rent translated to an extra $600 million paid to landlords last year, Zillow reported. For North Texans, that meant a median increase of $35 a month, higher than the nationwide rate of $26.
Rising rents are nothing new, said Zillow Chief Economist Stan Humphries.
“Over the past 14 years, rents have grown at twice the pace of income due to weak income growth, burgeoning rental demand, and insufficient growth in the supply of rental housing,” he said. “This has created real opportunities for rental housing owners and investors, but has also been a bitter pill to swallow for tenants, particularly those on an entry-level salary and those would-be buyers struggling to save for a down payment on a home of their own.”
For 2015, expect more of the same.
“We expect rents to rise even faster than home values, meaning that another increase in total rent paid similar to that seen this year isn’t out of the question,” Humphries said. “In fact, it’s probable.”
According to MPF Research, apartment construction in North Texas is at its highest since 1999, and is the second highest in the nation (Houston is number one). In 2014, developers built 15,575 new apartments in DFW; 30,196 were in the process of being built at the end of 2014. Only about 5 percent of rental units are empty, so those new units will likely be snapped up by eager renters.
In hot Dallas neighborhoods, like West Dallas, East Dallas, Uptown, North Oak Cliff, and Oak Lawn, construction is feverish, with almost 8,200 units under construction. Rents in these areas are also higher, running approximately $1,750 for new construction communities.
In 2015, expect at least 22,000 apartment units to open in DFW, and rents to increase another 3.6 percent, according to MPF Research.
In DFW, the average renter spends about 27 percent of his or her total income on rent, according to the Zillow Rent Index. Nationally, that percentage is closer to 30, which means renters are spending more of their income on rent than they have at any point in the past 30 years.
To put this in perspective, Zillow found that currently, renting a home is half as affordable as buying one. Nationwide, American renters could expect to spend about 30 percent of their incomes keeping a roof over their heads. Buyers spent about half that amount each month on mortgage payments.
This is a huge change from the years before the bubble, 1985 to 2000, when rent was typically more affordable in major metros than buying for those able to come up with a down payment.