Odessa-Midland ended the last year as Texas’ 11th most in-demand rental market due to high lease renewal rates and steady competition among renters looking for new homes.
According to RentCafe, competition for rentals in Texas was “quite reasonable” compared to the rest of nation because of “the state’s strong construction pace.”
>> Locally, in 2022, more than a third of renters in Odessa-Midland looked for a new place to live. Just over 59 percent (59.2%) of them decided to renew their leases.
>> An average of 7 prospective renters applied for each empty apartment in the area. Rentals remained on the market for an average of 40 days, with vacancy days dropping to 32 during peak rental season, which runs from May to August.
>> Apartment supply in Odessa-Midland increased by 3.5% in 2022. Out of all the Texas markets RentCafe analyzed, Odessa-Midland had the largest increase in the share of new apartments. Occupancy rates reached 90.5%.
>> Looking at the market’s evolution throughout 2022, Odessa-Midland was 23.4% more competitive in peak rental season compared to the first part of the year.
>> During peak rental season, apartments filled up faster, 8 renters applied for each vacant apartment and occupancy rates were higher.
A news release from RentCafe said to identify the most in-demand rental markets in Texas, they analyzed Yardi Systems apartment data based on occupancy rates, the number of renters applying for an available unit, vacancy days, the percentage of renewed leases and the share of new apartments.
“With these metrics, we calculated a Rental Competitivity Index (RCI) to determine how competitive the rental market was during 2022,” the release said.
Doug Ressler, manager of business intelligence at Yardi Matrix, said new supply is “kind of a mirror image of demand.”
“We don’t see a lot of new supply in the Midland-Odessa area,” Ressler said. “That’s because it’s competing against other type housing stock like mobile homes, some of the man camps, things like that down in the Permian Basin. That being said, there’s just not a lot of opportunity to be able to move and find something that’s comparable, so people stay put. There’s a cost associated with that to move for individuals. There’s also a cost for the person that owns the property, the asset manager, so there’s been a big push lately to try and retain residents because they don’t want to incur the extra cost. But also residents don’t want to incur the extra cost.”
Rentals are divided by rent by necessity and discretion.
“People are looking for improved amenities,” Ressler said. “They want to make sure that they have good broadband or Wi-Fi connectivity and they’re not so much worried about having a tennis court,” but they would like space with good connectivity and privacy where they can work from home.
People are also removing closets to make more private space. They also want access to green space, so they want a balcony view of a green area, for example, Ressler said.
With inflation and increased interest rates, development and construction loans are more expensive.
“The interest rate has always been high on those, double digits, but now it’s even higher. Also, it takes about 36 months, on average, it’s been taking longer once you put a shovel in the dirt to be able to get something out of it in terms of occupancy. So people are saying if it’s going to take me three years what’s demand going to look like in three years and can I carry the cost of this loan until then? The era of cheap money has gone away with (the) inflation that’s going on and the Fed’s effort to control it,” Ressler said.
“Also, the public perception is that there’s going to be some kind of a downturn, a recession, and I think people are waiting to see before they commit the dollars and cents to that to see what happens and how long it endures,” he added.
Ressler said it’s taking longer to build housing because the supply chain is “still broken a little bit,” plus the cost of lumber and steel are still pretty high.
He added that the biggest issue is concrete. The ash for concrete comes from coal fired power plants. Because coal fire power generation plants are shutting down, there’s not as much ash anymore.
