If it feels like you’re paying a lot for rent, you’re probably right: huge demand for DFW apartments in 2016, coupled with a shortage of supply, has pushed rents and building occupancy to record levels.
DFW rent prices are now averaging almost $1,100 a month, according to MPF Research. Add to that a vacancy rate of under 4 percent, and you’ve got demand at an all-time high. The past year’s demand total for apartments in North Texas jumped to 27,120 units, up sharply from the 2015 volume of about 17,000 units.
Fort Worth ranked sixth in the nation for rent increases in 2016, going up 6.7 percent over the previous year. Dallas was close behind, at number 11, with a 6 percent increase over 2015.
“With out apartment clients, we’re getting a lot of people relocating who are unsure if they want to buy or not,” said David Maez, co-founder of Vivo Realty Group. “I think we going to see competitive rent prices continue, even with the inventory that’s coming up.”
There are now almost 50,000 apartments under construction in North Texas, which is about 9 percent of nation’s building activity. That’s the country’s biggest block of product on the way by a large percentage, according to RealPage. About 29,000 of those apartments scheduled for completion in 2017.
“Dallas-Fort Worth is the country’s top spot for apartment demand by a huge margin, which speaks to the strength of the local job market and household formation pace,” said RealPage chief economist Greg Willett. “There’s a great mix of expansion in both the urban core and the suburbs.”
Michael Reynolds, owner of UResidential, built his business on helping people find apartments, especially in hot areas like Uptown and downtown Dallas. The rent prices keep increasing and most of the new properties being built are luxury, he said.
“They’re adding pretty big increases in rent, but they’re giving specials upfront, like one or two months for free, and some will prorate that across the term of the lease,” Reynolds said. “The problem is when that special goes away, people are not renewing because the prices jump hugely.”
Maez mentioned people relocating to DFW as one population of renters. There’s another segment of renters who sold their home in this peak market because of the possibility of a big profit, thinking they’d rent and find another home fairly quickly. Turns out, they often end up renting a lot longer than expected. And high rent prices are an unexpected burden.
Harriet Shaw, a Realtor with Keller Williams Urban Dallas, says she’s working with multiple families who are renting while they look for a home to buy. They are stuck in a seemingly endless cycle of competition for houses often going for above list price.
“It’s frustrating when you’re living in an apartment and you’re ready to get on with your life and buy a house and the market is not meeting you at the point,” Shaw said. “I don’t know if [these rent increases are] going to settle down—every buyer I’m working with thinks this is crazy.”
One of these families is Lina Betancourt and her husband Antoine Fensch, who moved to DFW from Paris, France, in September 2016. They rented an apartment in Frisco, thinking they’d find something to buy in the first six months and break their lease. They are working with Shaw and looking at lots of houses, all of which go under contract quickly for over list price.
“It’s discouraging and I’ll admit I feel like I’m ‘on call’ to run to a house at any time,” Betancourt said. “We pay $1,500 a month in rent and it sucks.”
As DFW rent prices keep going up, many people are considering buying after doing the math, Maez said.
“If you’re spending $1,700 a month on rent and your mortgage is going to be $1,300, a lot of people are going to make that cost comparison and purchase a home based on math alone,” he said. “It looks like were going to have some higher inventories [this year] and maybe it will even out a little and give some relief for renters.”
The increase in DFW inventory might help, but Willett doubts it.
“With so many properties finishing during the near term, there will be lots of product moving through the initial lease-up process at any given time,” Willett said. “However, scheduled deliveries in 2017 aren’t drastically beyond 2016’s demand tally, so the market performance outlook remains solid…The question is really whether rent growth will slow a little or a lot—our forecast calls for rent growth near 4 percent.”