No Vacancy - Q4 2021 California, Florida, And Texas Vacancy Analysis

The rental market is continuing to show its strength with vacancy numbers remaining at consistent lows across California, Texas, and Florida.

This report is focused on the rate of change for vacancy rates with particular attention paid to any markets slipping/gaining faster than others.

The two largest, public single-family rental (SFR) operators are American Homes for Rent (AMH) and Invitation Homes (INVH). Due to public reporting requirements, each company prepares a quarterly report that documents their occupancy rates across each market. This report relies on those public disclosures to draw its conclusions.

INVH has a sizable California portfolio but only segments North vs South. AMH does not have material holdings in California and they do not report any leasing metrics for those markets. For Texas and Florida, there is sufficient information to create a blended rate from both large operators.

Independent single-family investors, target properties of a similar size and type, making this report especially applicable to their portfolios and future purchases.

California Rental Vacancy Rates

A much larger jump than anticipated was seen in INVH’s Northern Cal vacancy rate. This acceleration is noteworthy and it is unclear exactly where the rise might be coming from.

One note from the AMH conference call stood out to me:

“We're still seeing strong migration from California into the Western markets like we've talked about before. We haven't seen that slow down at all. If you look at the number of applications from California they're up about 60% to what they were pre-pandemic levels for the last quarter” -Bryan Smith, COO of AMH

California vacancy rates for single-property investors in Q4:

  • Bay Area: 2.5%
  • Sacramento: 2.5%
  • San Diego: 2.5%
  • Los Angeles: 2.5%

Texas Rental Vacancy Rates

Data shows that vacancy rates are declining for both Houston and Dallas-Fort Worth. This is encouraging news for real estate investors with holdings in Texas as these are the largest markets in the state and the blended vacancy rate decreased slightly quarter-over-quarter.

Note, the AMH Dallas-Fort Worth vacancy rate did spike 70 basis points, or 28% from its previous level. However, INVH saw a decrease in its vacancy rate of 100 basis points, or 24% from its previous level.

AMH owns a material amount of property in both San Antonio and Austin. Both of these markets experienced an increase in vacancy rates over the past 3 months. This represents a cooling of those markets, leading into a traditionally slow holiday season for rentals.

The rate of change is significant and should be monitored and adjusted in any valuation models. Leasing weakness can be expected as the holiday season is upon us.

Texas vacancy rates for single-property investors in Q4:

  • Houston: 3%
  • Dallas-Forth Worth: 3.5%
  • San Antonio: 4%
  • Austin: 4%

Florida Rental Vacancy Rates

Jacksonville, Tampa, and Orlando markets are covered by the large funds in their latest report. Awning recently made these markets available to real estate investors nationwide and it is encouraging to see vacancy rate improvements over the past quarter.

Notably, the blended rate for Orlando improved by 50 basis points, or by 18%.

Due to low vacancy rates, FL is a highly attractive option for investors (and it shows). In July 2021 Tampa saw a 70%+ YoY increase in Cash Sale Closings. Over 30% of all July 2021 sales in Tampa were cash purchases. -Sean, Awning Advisor for Florida

Florida vacancy rates for single-property investors in Q4:

  • Jacksonville: 2.5%
  • Tampa: 2.5%
  • Orlando: 2.5%

Bottom Line

Even as markets continue to cool off from the buying frenzy of early 2021, we are seeing no or very low vacancy rates. For investors this means that properties are sitting vacant for less time, are fetching higher rents, and the opportunity to invest in these markets is still valuable.

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