Apartment prices are at a record high in the Austin-area, averaging $1.15 per square foot, according to a report by Austin Investor Interests.
More people are moving to Austin and there hasn’t been a lot of new apartments constructed, although that is changing. But many of the new apartments being constructed are centrally located and aren't cheap.
“A lot of these units average a much higher price, $1.39 a square foot, with at least a third of these units being in the 78704 zip code or in the Central Business District, which averages $1.70 up to $2.50 a square foot," said Robin Davis with Austin Investor Interest. "These new units will raise average rents fairly significantly, but rents are also rising on average 5 percent anyway without these units."
Rising mortgage rates may also be pushing people out of the home buying market, Davis says. Average rates for 30-year fixed-rate mortgages are at 4.58 percent this week, according to the Mortgage Bankers Association. That's down slightly from last week, but way up from 3.68 percent in April. A higher mortgage rate means a higher monthly mortgage payment, putting previously affordable homes out of reach for some people.
But developers are responding to higher rents in Central Texas. Davis says 17,000 new apartment units are under construction in the Austin-area, and another 10,500 are expected to be built. She says that could help slow the rise in rents.
"There's certainly a possibility of that as people start competing for market share," she said. But at the same time, lower-grade properties are racing for a piece of the higher-end market by installing faux wood floors, granite countertops.
"Those rents are increasing as well with these upgrades," she says.