Austin’s 2-Bedroom Apartment Market: Vacancy Rates, Rental Trends, and Construction Data

October 29, 2024 : In recent years, the rental market in the Austin-Round Rock-Georgetown area has seen dynamic changes shaped by shifts in vacancy rates, rental prices, and the volume of permits issued for new apartments. These trends reflect broader market forces at work, such as population growth, supply and demand fluctuations, and economic conditions. This analysis takes a closer look at the data from January 2017 to October 2024, exploring how each variable—vacancy rates, rental prices, and permit numbers—impacts the local rental market.

Beginning in 2017, Austin’s rental market was marked by steady demand for two-bedroom apartments, with vacancy rates starting at 8.43% in January of that year. This demand kept the rental prices increasing, with average monthly rents rising from $1,231 in early 2017 to $1,342 by the end of 2019. During this period, permits for 5+ unit buildings averaged around 869 per month, indicating steady construction to meet tenant demand. This additional supply was readily absorbed by the market, which kept rental prices stable or slightly increasing each year. By the end of 2019, vacancy rates had declined to 6.61%, showing that demand was healthy and that the market was still tight despite new inventory entering the market.

The impact of the COVID-19 pandemic in 2020 introduced new challenges. From January to July 2020, vacancy rates rose from 6.84% to a peak of 8.03%, reflecting the pandemic's disruption of economic stability and population mobility. Rental prices stabilized during this time, remaining around the $1,300 range as landlords aimed to retain tenants in a more uncertain environment. Despite these challenges, construction activity remained strong, with monthly permits averaging around 1,567 in 2020. The high rate of new permits suggested that developers remained optimistic about the Austin area’s long-term growth, even amid short-term setbacks.

As the pandemic restrictions eased, 2021 marked a surge in demand for rental properties, with vacancy rates rapidly declining from 7.63% in January to a low of 3.95% by September. This decrease in vacancies was accompanied by a sharp rise in rental prices, which climbed from $1,299 in January 2021 to a peak of $1,725 by August 2022. The market was bolstered by an influx of residents moving to the Austin area, combined with economic recovery efforts that fueled job growth and household formation. During this period, monthly permits for new multi-unit buildings were high, averaging over 2,137 per month. Yet, despite this increased construction, tenant demand continued to push vacancy rates lower, driving rental prices to record highs.

By late 2022, the landscape began to shift. Vacancy rates started to edge upward again, reaching 6.12% by September 2022 and climbing steadily into 2024. This rise in vacancies can be attributed to the high volume of new units completed in response to the intense demand in 2021 and 2022. The increase in housing stock outpaced the current demand, pushing vacancy rates to 9.45% by October 2024. As a result, rental prices started to soften, declining from the 2022 peak of $1,725 to around $1,476 by October 2024. This adjustment suggests that the Austin rental market may have reached a saturation point, where new supply outpaces tenant demand, leading landlords to adjust prices downward to fill vacant units.

Permit data for 2023 and 2024 shows that construction activity remained robust, with monthly averages of 1,757 in 2023 and 1,702 through the first ten months of 2024. Although slightly lower than the 2021 peak, these figures still represent a high level of new construction, which has contributed to the current inventory surplus and rising vacancy rates. The increased housing availability is a positive development for renters, who may benefit from greater choice and more competitive pricing. However, for landlords, the shift in supply-demand dynamics means adjusting expectations and pricing strategies in a market that has evolved from intense competition for limited rentals to a more balanced or even tenant-favorable environment.

The rental market in Austin-Round Rock-Georgetown has undergone a notable transformation over the past seven years. The combination of sustained population growth, fluctuating demand influenced by economic conditions, and a steady influx of new construction has created distinct market phases. As vacancy rates continue to rise, and with rental prices adjusting to new levels, the data suggests that the Austin rental market is entering a new era, one where supply and demand are more aligned. For potential renters, this translates to a broader selection of housing options, while landlords may need to adapt to a more competitive market.

This analysis of vacancy rates, rental trends, and construction permits provides a comprehensive look at how the Austin rental market has evolved. With current trends continuing, the coming months may reveal further shifts in this dynamic and fast-growing region​​