Last year, the rental market in North Texas was on fire. Properties sprang up and people flocked to the city for relocations while builders worked to keep pace with demand.
In 2014, renters leased units nearly as fast as they emerged on the market. Things appear to be different this year, with reports indicating a decline in apartment building in the DFW area. Here’s an overview of the declining apartment market in this area.
Declining Apartment Construction in DFW
Although apartment developers in North Texas are increasing construction to the maximum level in decades, the demand for new units has declined. Industry experts reveal that apartment leasing in the first quarter was at the lowest rate in three years in the Dallas-Fort Worth Area.
During the initial three months this year, net apartment leasing totaled 1,989 units in this area. Simultaneously, developers completed 5,763 new apartments. Moreover, over 43,000 D-FW rentals are still under construction.
In fact, there are more apartments under construction in North Texas than other areas in the country. With a weakening demand and aggressive building activity, it appears the area should anticipate a competitive leasing environment.
Analysts expect rent growth to decline to 4-4.5%, which is still a strong number by historical standards. Approximately 5% of D-FW apartments are vacant and the slowdown in leasing appears to be the result of increased caution by consumers.
The market also reveals disappointing home sales and more renters are staying put rather than relocating to newer, more costly properties. Analysts are however optimistic and assert that a bad leasing quarter isn’t sufficient to set a trend. Nevertheless, a decline in renter demand could signal investors and builders to postpone projects.
Home Construction Declines in the U.S.
In the U.S., new home construction cooled unexpectedly in January and housing starts fell 3.8% to a 1.1 million annualized rate. Reports also reveal that all the regions in the U.S. recorded a decline in construction.
Permits also declined 0.2%, revealing little scope for construction rebound in February this year. The decline in starts in January was led by a 3.9% decline in construction of single-family houses. Furthermore, there was a 3.7% decline on multifamily homes, for instance apartment buildings and condominiums.
On the same note, analysts reveal that builders are very cautious to increase spending for fear of an economic downturn. Although analysts expect continued demand for new housing and increased prices, builders are not accelerating new construction.
According to reports, housing demand would gain from faster income growth and more broad-based credit access, enabling more Americans to capitalize on low mortgage rates.
Experts also expect demand to advance in the longer term because more young adults who postponed home ownership are improving their finances and starting to buy entry-level homes in a major way.
Factors Influencing the Real Estate Market
Real estate represents a considerable portion of most people’s wealth, especially for numerous homeowners in the U.S. Some of the factors affecting this market include:
Interest rate changes can influence your ability to buy a residential property greatly. That’s because as the rates decline, the cost to get mortgage also decreases, creating a higher real estate demand. On the other hand, higher interest rates result in lower demand.
Economic indicators such as employment data and GDP measure a country’s economy. In general, a sluggish economy results in a slow real estate market. However, the economy’s cyclicality can have differing effects on varying kinds of real estate.
Although the D-FW area is showing a decline in apartment construction, experts and analysts assert that this is unlikely to continue throughout the year. For this reason, consumers can expect new projects within the year.
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