Our analysis includes a comparison between High-Cost Markets and CONTI’s target Texas Markets of Dallas-Fort Worth, Austin, and San Antonio. We define High-Cost Markets as U.S. metropolitan areas with a cost of living index greater than 125 percent of the U.S. average and among the top 25 most active multifamily markets according to real estate data provider, Real Capital Analytics. The High-Cost Markets, including New York City and Los Angeles, represent 13 metropolitan areas and over 50 million residents. During the decade spanning from 2010 to 2019, rent growth in the CONTI Texas Markets averaged 5.1 percent annually, compared to only 3.9 percent in High-Cost Markets. This is a cumulative total of 12 percent additional rent growth in the CONTI Texas Markets. While the COVID-19 pandemic has paused rent growth nationally, the Texas Markets are still poised to continue their outperformance during both the near and long-term.
Over the next 18 months, CONTI’s Texas Markets are forecast to remain at stable rent growth. Over the same period, projections show rents declining in High-Cost Markets. Through 2024, a similar pattern emerges; rents in the Texas Markets are projected to have further growth over the next five years compared to smaller gains in the High-Cost Markets. We believe that the demographic trends in place before the pandemic, migration flowing from high-cost areas to low-cost cities in the Southern U.S., will only accelerate in the coming years. Over the past decade, robust demand for multifamily in the Texas Markets has translated into exceptional rent growth compared to their higher-cost counterparts. At CONTI, we believe the historical data and trends support our expectation that Texas Markets will continue their persistent path of stability and growth.