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Rents dropping with downturn

Rent for a one-bedroom apartment in Odessa cost about 15 percent cost less in August than during the same month of 2014, reflecting a continuing drop amid the oil and gas downturn after years of tight apartment housing and rising costs.

In August, an average one-bedroom in Odessa cost $850 per month, while a similar apartment in Midland cost $920, or a year-over-year decline of about 17 percent, according to the San-Francisco based analytics firm Apartment List. For a two-bedroom, renters’ rates declined more than 12 percent in Odessa and nearly 14 percent in Midland.

The rent decreases, which experts say are driven by an uptick in vacancies, are welcome news to renters whose incomes did not rise with the surge of oil and gas activity in recent years. These are people like Ayonna Poindexter, a 21-year-old mother, who spent Friday afternoon moving into a $750-a-month apartment at Peppertree Place Apartments at Oakwood Drive and JBS Parkway.

Poindexter said her last apartment in Odessa, a two-bedroom, cost $1,400 a month, while she worked as a server. She said she was relieved to find her new apartment after a summer stay with family out of state.

“I was surviving,” Poindexter said. “But it was just hard.”

In order for rents to rise, more workers would have to move to the area or start seeking apartments.

“The story in this case is pretty straightforward,” said Andrew Woo, a data scientist with Apartment List, based in San Francisco. “The oil price drop has hit Texas overall but definitely it hits some areas bigger than others, and definitely Midland and Odessa are two of the hardest hit.”

Related: Rent or Buy: 5 things to keep in mind as you search for your new home

Vacancies also pressure apartment managers to offer better terms to compete with the hundreds of apartments built in Odessa during the boom.

The Permian Basin Apartment Association reports an occupancy rate of 92 percent in Odessa and of 86 percent in Midland, compared to near-full rates a year ago.

That includes managers at some of the giant real estate firms who bought into the Odessa and Midland area at a time when the cities saw the fastest rising rents in the state.

In response to the rising vacancies, apartment managers are offering move-in deals such as a month-worth of free rent on a year lease, allowing renters to renegotiate leases mid-term in an effort to encourage them to stay and waiving the administrative fees commonly charged for processing applicants’ paperwork, which often amounts to about $75.

“Things like that we haven’t seen for a long time,” said Rhonda Lesley, who heads the apartment Association. She said such deals are “pretty much across the board.”

But the Midland rental market also faces greater pressure during the downturn, Lesley said. That is because during the boom, the Tall City drew a much more new apartment construction.

Odessa added 1,418 apartment units during the boom years between 2011 and September 2014, according to apartment association data. But builders in Midland doubled that number, adding 2,895.

Since that time, developers in Midland began adding more than 2,100 units in Midland. Odessa, meanwhile, added none.

“Everything is kind of put on hold right now,” Lesley said. “We’ve seen it happen so many times that people adjust. We’ll see it go back.”

But she said that depends on the broader economy, and specifically, when companies forced to shed employees amid oil prices below $50-per barrel return to hiring, bringing another influx of residents into the area.

ON THE NET

Here is a look at apartment rates in cities throughout Texas:

https://www.apartmentlist.com/rentonomics/august-2015-texas-rental-price-monitor

This article was written by Corey Paul from Odessa American, Texas and was legally licensed through the NewsCred publisher network.

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