With a 12% increase from a year ago, Yardi Systems reported that the Dallas area ranked fourth among major urban areas seeing the greatest rental cost gains. And the worst is far from over, as analysts believe that rent is likely to rise by another 10.8% in the coming year.
Despite significant declines in apartment leasing, DFW has continued to see strong rent increases.
Richardson-based RealPage reported that the DFW experienced its first-ever decline in over five years during the first quarter, but in the third quarter, there was an increase, up 13.4% from a year ago.
RealPage reports that apartment leasing across the United States experienced a reduction of 82,095 units in the most recent quarter, meaning that the number of renters moving out topped the number of renters moving in.
In reaction to this statistic, Jay Parsons, an economist with RealPage, said that it is “the first time in RealPage’s 30 years of tracking U.S. apartments that demand registered negative during a third-quarter period.”
In a bid to find the root cause of the spike in rent, many experts have stated different opinions and reasons for the high cost of living.
Parsons believes that inflation, high rentals, and fluctuation in the economy are the culprits behind the fall in leasing.
Parsons, however, still remains optimistic about the situation, stating that even though the turnover is low and the cost of rent stays heightened, he expects some moderation very soon. To him, the demographics are favorable.
Commenting on a new study that found the biggest rental increases in the Sun Belt and West, Ken Johnson, an economist at Florida Atlantic University’s College of Business, said, “In areas around the country where demand overwhelms supply, renters are getting hit with near-record premiums and annual increases. In markets with more of a balance between supply and demand, rents are relatively stable.”
This balance is what Parsons is banking on, as he pointed out that Dallas and other areas in the country have been experiencing a freeze on household formation, high inflation, and consumer confidence. These factors, he believes, are huge determinants of housing demand.
There has been a decline in home buying due to rising interest rates, according to Parsons, and the decline is expected to spread to rent prices due to the impact housing markets have on the rental market.
While Parsons shines a ray of hope, he advises that the best thing to do is to “hit the pause button on housing searches right now in general … Over the next three or four months, I think we’ll see some discount on rents. I don’t think it’d be a dramatic rent cut but I do think there’ll be better deals out there that you’ll see.”
