Houston, TX Multifamily Market Report
Market Overview
Due to an influx of new supply, the multifamily demand in Houston has rebounded significantly since the start of 2023. Strong demand for Class B units has emerged for the first time since 2021. New supply additions have exceeded demand every quarter since Q4 2021; vacancies could continue to expand if demand remains subdued. Houston’s consistent ranking among the leading metros for employment and population growth has continued to attract apartment developers. The metro ranked second in the country in nominal population growth in 2021 and 2022. Despite general economic uncertainty, stakeholders within the multifamily market remain positive about Houston’s long-term potential for job growth.
Highlights
- Average monthly rents have increased by about $145 per month to $1,740 per year.
- Approximately 7,600 units were absorbed in H1 2023, in contrast to the nearly 12,700 units that were delivered.
- Close to 30,000 new units are anticipated to open in 2023.
- Currently, year-over-year (YOY) rent growth in Houston sits at 0.7%, close to the national average of 1.1%.
Rents | Vacancy | Construction
Houston rent growth is anticipated to continue outperforming its neighboring cities of Austin, Dallas-Fort Worth, and San Antonio.
Leasing momentum rebounded during H1 2023 but remains well below historic norms. Class A units have posted positive annual absorption. Both of the other class segments have seen absorption fall YOY; however, demand in Class B units has shown signs of improvement in 2023. Houston’s vacancy rate has risen to 9.9% from a seven-year low of 7.3% due to supply outpacing demand.
With more supply entering the market and new units leasing up, Class B units should profit the most as demand for affordable housing is a metro-wide issue. Multifamily rents are predicted to grow by 0.8% in 2023. There are currently 28,689 units underway, which aligns with the market’s five-year average. The metro saw 160,000 net units added during the past decade.
Sales
Accounting for more than 60% of buyer volume over the past four quarters, private capital is now driving investment volume in Houston. Pricing appears to have flattened since mid-2022, after price per unit increased by more than 40% between mid-2017 through mid2022. Total sales volume decreased for the past four consecutive quarters through Q2 2023 as the impact of higher borrowing costs became evident.
Houston by the Numbers in the Last 12 Months
- Units Under Construction: 28,689
- Units Delivered: 21,121
- Vacancy Rate: 9.9%
- Asking Rent Growth: 0.7%
- Sales Volume: $1.3B
- Sale Comparables: 227
