Key facts
- Rents have fallen approximately 8% in Austin, Texas, since mid-2023.
- Cities like New York, San Francisco, and Chicago have experienced the strongest rent growth.
- A study by Aziz Sunderji of Home Economics suggests homebuilders made a 'timing mistake' by oversupplying the market.
- Slower migration into cities like Austin contributed to decreased housing demand.
- Remote work and tech job numbers had the least impact on rent fluctuations.
Rents in several major U.S. cities have diverged since mid-2023, with some experiencing declines while others see significant increases. A study by Aziz Sunderji, founder of Home Economics, suggests that a 'timing mistake' by homebuilders is a primary driver for falling rents in cities like Austin, Texas.
In Austin, rents have decreased by approximately 8% since mid-2023. This decline is attributed to a combination of factors: a slowdown in migration into the city between 2021 and 2024, which reduced housing demand, and a surge in new housing supply from buildings with permits approved during a previous demand boom. Sunderji noted that Austin represents an extreme case of this combination, but the pattern is generalizable.
The study found that cities with high rent valuations relative to local incomes and a deceleration in migration, such as Austin, San Antonio, Denver, Phoenix, and Dallas, experienced rent declines. Conversely, New York, San Francisco, and Chicago saw the strongest rent growth, characterized by home valuations near historical norms and fewer residents moving away.
Sunderji indicated that remote work and tech sector influence had the least impact on rent changes, as cities with high concentrations of these workers, like New York and San Francisco, still experienced rent increases. The factors driving rent decreases in cities like Austin were not policy-driven but rather a consequence of developers responding to past demand surges without foresight into the subsequent calm.
Developers are now facing excess inventory and compressed profit margins, leading them to offer concessions and rate buydowns to attract buyers. Sunderji stated that planning for such market cycles is not feasible.