Jesse Godfrey is one of many Odessans who saw the drop-off in oil and gas activity and wonders when the downturn will begin to show up in his living expenses.
Godfrey pays $1,200 a month for his apartment, where similar units have risen to a rate of $1,500. The oil patch equipment inspector has lived in Odessa long enough to remember rents well below those rates, but said he does not know what to expect when he has to renew his lease in May.
“I’m hoping my lease will at least go down,” he said in a Facebook message to the Odessa American.
But signs mount that at least some rent relief is on its way.
To be sure, Odessa and Midland have among the most expensive apartment rents in the state. But no apartment complex has a wait list anymore, according to the Permian Basin Apartment Association, which counts about 26,000 units among its Permian Basin-wide membership.
Some apartments are starting to advertise move-in specials.
And the apartment association now reports Odessa and Midland occupancy rates are also down to about 93 percent — still packed, but less than the 99 percent occupancy rate described in last summer’s annual apartment survey by the Odessa Chamber of Commerce, when rents averaged about $1,100.
January showed early signs of a coming decrease, according to Apartment List, a San-Francisco based group that began collecting data on the area a few months ago in response to industry demand about the hot market.
In Odessa, average rent for a one-bedroom apartment increased slightly from $950 in December to $960 in January. A two-bedroom apartment decreased slightly from $1,350 to $1,330. Most telling, perhaps, was that rents were relatively flat.
“What we would have expected to see in Odessa is continued growth,” said Max Rosett, a data scientist for Apartment List, who expects rents to drop this year. “Nothing too dramatic, but the start of the upward trend for 2015. And we didn’t see that.”
The apartment association began encouraging property managers to submit accurate data to the group as a way to hedge against their chief concern — that the region gets overbuilt — by showing outside developers an accurate picture of the market as it changes.
In Midland, which is actually now the most expensive rental market in the state, the average rent for a one-bedroom decreased from $1,340 to $1,310. Rent for a two-bedroom during that time decreased from an average $1,530 to $1,520.
None of that amounts to a big change for property managers yet, said Rhonda Lesley, the head of the apartment association.
“Everyone is just holding on to see what happens after spring break,” Lesley said. That is the busy season, the second quarter. Most people move in the summer. And most leases are renewed in the summer, so that is when most rent changes often occur.
But many apartment managers are unsure how the oil downturn will play out, Lesley said.
In 2009, for example, the drop from oil prices from above $140 per barrel to below $40 in a span of about six months did not last long enough to impact rents. Lesley at the time was property manager for Mission Green apartments, which she described as “one of the first high-end properties” in Odessa.
Then, a 967-square-foot one bedroom apartment with an attached garage commanded a monthly rent of $995. Now, those same units rent for about $1,600, she said. And the property is now owned by Weidner Apartment Homes, one of the large national investor groups that acquired property in the region during the boom.
Instead, most property managers worry most about overbuilding. Thirteen apartment complexes were built in Odessa and Midland since 2011, adding 4,313 units. Of those, 1,798 apartments were in Odessa.
The area has another 10 complexes, including expansions of newly built properties, that received building permits but have not broken ground. Only two are in Odessa and both are off Highway 191 — Legado Ranch and an expansion of Sedona Ranch.
Whether developers decide to delay those projects remains unclear.
“For a developer there are all sorts of different factors that go into it,” Rosett said. “But if you need to assume rents are going to stay high to make something work, you would want to rethink that assumption.”
Economists who study the region and its crude industry have said it takes time for an oil plummet to bleed into the local economy but it is sure to happen.
“You are going to see that in the next two to three months,” said Ray Perryman, the Odessa economist who runs the Perryman Group. “It doesn’t take long.”
The regional benchmark Plains-West Texas Intermediate posting ended at $46.25 per barrel on Friday. That is less than half the peak price of June, and the region grapples with layoffs expected to impact thousands of workers.
It is also a reality of the apartment market that rent reductions require vacancies, insiders say, and often the vacancies come from people who are laid off and move away from the area.
That is not an idea lost on renters who want relief, especially the long-time residents like Deidre Orcutt, a married mother of four who pays about $1,400 in monthly rent. Orcutt isn’t in an apartment — like many Odessa renters, she is in a home belonging to a private landlord — but she said she has still seen her rent double in the seven years she has lived there.
“Not everyone works in the oilfield,” Orcutt said. “And I’ve actually talked to oilfield families who are struggling too but they can’t afford the prices here. But you don’t have any option, because you can’t find anything cheaper.”
Her plan is to buy a home. She said she got a good price from the developer Betenbough, on a four-bedroom house for a down payment of about $6,000 and a monthly payment of about $1,600, including insurance and bills.
“We are trying to wait now,” she said. “And we are hoping that by some miracle everything decides to go down.”
This article was written by Corey Paul from Odessa American, Texas and was legally licensed through the NewsCred publisher network.