The Daily Texan ran a piece a couple of weeks ago on the high cost of housing in West Campus which really illustrates the importance of putting neighborhood-level housing data in context of the larger metro market:
Characterized by its proximity to the UT campus and many conveniences, West Campus is one of the most popular — and expensive — living areas for UT students. According to Multiple Listing Service, a professional rent listing used by West Campus realtors, rent in the area has increased by about 15 percent since 2008.
At least three new apartment complexes will have their grand opening this year, including 2400 Nueces, Callaway House and 21 Pearl. West Campus has also caught the eye of some out-of-state and international investors, which increases the value of land.
The popularity of West Campus is driving up prices at older apartment complexes in the area, leading some UT students to share rooms or leave the neighborhood entirely. Apartments are also being leased quicker, forcing current and prospective students to make a housing decision or lose a space.
Rent for recently built apartments in West Campus averages $1,250 a month for one-bedroom apartments and $850 per bedroom a month for two bedroom apartments, according to the listing service.
Stories like this always generate a bunch of hand-wringing and some of it's justified -- West Campus, after all, is very expensive.
But though the rents in West Campus are high, the 15% increase in rent since 2008 is not. Or, rather, it's not when compared to the rest of the Austin metropolitan market. Rents throughout Austin have risen since 2008. A bunch. West Campus, being a part of Austin and therefore linked to housing market in other neighborhoods, is experiencing the same pressure from rising demand.
In fact, here's some evidence that West Campus has fared better than the city as a whole. Below is a chart prepared by Charles Heimsath's Capitol Market Research depicting average rents and occupancy rates in the Austin market since 2007. Between the second quarter of 2008 and the the second quarter of 2013, average rents per square foot rose from $0.96 to $1.17, an increase of nearly 22%.
Note that $0.96 (according to this chart) was the pre-recession peak; the increase over the trough was even higher.
When put in context of this larger market trend, a 15% increase in rents in West Campus is notable for being below average. It's all the more notable given that a large percentage of the housing in West Campus is new, and, as everyone knows, the new stuff is super-duper expensive. This means that any sort of average rent in West Campus that includes all the housing stock is skewed by the new stuff. By contrast, in the Austin metropolitan market as a whole, the expensive, new development makes up too small a percentage to have much effect on average rents.
I'll caveat this by noting that it's dangerous to compare averages that were calculated with different methodologies using (possibly) different data sets. Perhaps the West Campus average quoted in the story was based on median rents, or average rents per bed, or some other metric, and the per-square-foot average has seen an increase similar to that of the Austin market as a whole. Dunno.
The point, though, is that you can't meainingfully evaluate trends like "rents rose X% in this particular neighborhood over the last five years" without understanding what's happening in the larger market. That worrisome trend might turn out to be the wrong trend to worry about.