There should be no doubt in the minds of those who read our blog regularly that we’ve been high on many Texas markets in terms of multifamily potential over the past several years.  Texas’ economy is still plugging away at an impressive clip despite the national stresses and strains; Texas continues to attract new residents by the thousands every month, though not at the rates seen over the past several years. 

So what’s up with multifamily occupancies in the metro areas?  ALN Apartment Data tracks six Texas markets and has recently release their report covering August of 2008.  Occupancies were down in five of the six markets –

Austin Occupancy 91%, down 2.4%
Dallas Occupancy 90.9%, down 0.1%
Fort Worth Occupancy 89.2%, down 0.1%
San Antonio Occupancy 88.6%, down 1.7%
Austin Occupancy 90.3%, down 1.5%

From August 2007 to August 2008, average quoted rents in the five markets above increased an average of 3.0%; the largest gain was 3.9% in Austin, the smallest 1.6% in Fort Worth. 

ALN’s reported occupancies for August are 1-1.5% lower than data we’ve mined from brokers and PMs in these markets in September and October.  So what’s up with the Texas metroplex markets above? 

We’d surmise three issues operative here.  First, Texas markets have a history of building additional units quickly when demand is high, tending toward oversupply at the high end (Class A).  My family and I witnessed it firsthand living in San Antonio for a year to oversee a project a couple of years ago.  Austin is delivering over 8000 new units to the market in 2008.  At least permitting and construction in most of the metros has slowed by now.  B- and C+ investors are not as critically impacted by the delivery of relatively expensive Class A  units. 

Secondly, job growth in Texas has slowed, as has job related in migration of workers and families.  Texas’ job growth rate as a state is still quite impressive given the state of the nation’s economy currently, and many Texas metros are growing new jobs at impressive rates as well – job creation has slowed however compared to what it was a year ago. 

Finally, single family housing has remained very strong in many Texas metros – with high measures of affordability relative to median income and very reasonably balanced inventories in most metro markets.  The credit crisis has slowed marginal borrowers, but home sales have been brisk in most Texas metro markets. 

We’re still high on most Texas markets right now, though think the best values are in the secondary (and maybe even a couple of tertiary) markets right now…..

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