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North Texas apartment builders opened almost 26,000 new rental units in 2018.
The huge supply of Dallas-Fort Worth apartments kept a lid on landlords’ abilities to raise rents.
“Dallas-Fort Worth continued to lead the nation for both completions and demand by a huge margin in 2018,” said Greg Willett, top economist for Richardson-based apartment firm RealPage. “Likewise, North Texas has by far the most product under construction.”
At the end of the year, more than 35,000 apartments were in the construction pipeline in North Texas – about 5,000 units more than a year earlier.
With so much construction fourth quarter apartment rents in the D-FW were up only 2.4 percent from the end of 2017, RealPage says.
“D-FW is trailing the national norm on rent growth,” Willett said. “Pricing up 2.4 percent in 2018 compares to 3.4 percent for the U.S. as a whole.
“However, local rent growth did pick up during the last half of 2018, after cooling to a low point of 1.5 percent as of mid-year,” he said. “There continues to be an unusually big difference in rent growth between Dallas and Fort Worth, with the new supply moving through initial lease-up limiting the ability to push rents in metro Dallas.”
Fort Worth area apartment rents were 3.6 percent higher year-over-year in the fourth quarter.
While average area rents are growing at less than half the rate of a couple of years ago, month costs in the fourth quarter rose to a record $1,124 in North Texas and $1,155 in the Dallas area, according to RealPage.
Net apartment rentals in the final three months of 2018 totaled only about 1,000 units – the weakest quarterly leasing volume of the year in North Texas.
“Only 1,000 units of demand in the fourth quarter is a little light by recent standards, but not a red flag,” Willett said. “The average fourth quarter demand total in the previous five years is 2,400 units, ranging between 900 units in 2013 and 3,500 units in 2016.”
Overall D-FW apartment vacancy levels remain low at just more than 5 percent.
“Expectations for calendar 2019 call for more of the same,” Willett said. “Occupancy should remain in that range of 94 percent to 95 percent.
“Rent growth should stay in that range of 2 percent to 3 percent overall, with pace of rent growth in Fort Worth again running about double the performance in Dallas.”