MARKET SNAPSHOT

2025 Houston Forecast

2024

FORECASTED ANNUAL CHANGE

2025

$1,348

Q4 AVG. EFFECTIVE RENT

2.1%

FORECASTED ANNUAL CHANGE

$1,377

Q4 Avg. Effective Rent

90.5%

Q4 AVG. OCCUPANCY

0 BPS

FORECASTED ANNUAL CHANGE

90.5%

Q4 Avg. Occupancy

23,697

2024 COMPLETIONS

17,951

10 Yr. Avg. Annual Completions

9,099

2025 COMPLETIONS

19,893

2024 NET ABSORPTION

14,054

10 Yr. Avg. Annual Net Absorption

10,960

2025 NET ABSORPTION

Source: CoStar
Key Market Themes for 2025
  • OCCUPANCY LEVELS TO STABILIZE IN 2025

    Houston’s average occupancy rate declined by 20 basis points in 2024 to 90.5%, but a slowdown in new deliveries combined with steady demand is expected to support market stabilization. Stabilized occupancy rates are projected to remain steady at current levels throughout 2025.

  • MID-TIER SEGMENT REBOUNDS IN 2024

    Houston's mid-tier properties have shown a notable rebound, with net absorption of 4,300 units in 2024, a sharp recovery from the negative absorption in 2022 and 2023.

  • HOUSTON POISED TO OUTPERFORM TEXAS PEER MARKETS

    Houston has largely avoided the steep rent cuts seen in peer markets like Dallas-Fort Worth and Austin over the past two years. In 2025, it is expected to lead major Texas markets in rent growth, with a projected 2.1% annual increase by Q4, reflecting its resilience amid ongoing supply challenges.

2025 SUPPLY TRENDS

MULTIFAMILY STARTS DECREASED IN 2024

MULTIFAMILY STARTS DECREASED IN 2024

2023: 17,617 units > 2024: 6,293 units

Annual Decrease of 11,324 units or -64.3%

10 Yr. Historical Annual Average: 16,937 units

UNITS UNDER CONSTRUCTION TRENDING BELOW THE 10 YEAR AVERAGE

UNITS UNDER CONSTRUCTION TRENDING BELOW THE 10 YEAR AVERAGE

14,532 units under construction as of December 31st, 2024

10 Yr. Historical Annual Average Units UC: 26,123

44.4% lower than the historical average

UNIT COMPLETIONS PROJECTED TO DECREASE IN 2025

UNIT COMPLETIONS PROJECTED TO DECREASE IN 2025

2024: 23,697 units > 2025: 9,099 units

Annual Decrease of 14,598 units or -61.6%

10 Yr. Avg. Annual Completions: 17,147

Apartment development activity in the Houston metropolitan area is finally beginning to taper, with the volume of units under construction falling below the 10-year historical average at the close of 2024. Completions are also expected to dip below their historical average in 2025. This slowdown follows a sharp 64% drop in new starts during 2024, totaling just 6,300 units, the lowest level since 2011. These trends are expected to create much tighter market conditions in the latter half of 2025 and into 2026.

Suburban areas to the north and west, including Bear Creek/Copperfield, Northwest Houston, and Outlying Montgomery County, have been the primary beneficiaries of new suburban construction. Urban core submarkets, such as Neartown/River Oaks and The Heights, have also experienced pronounced supply growth. These neighborhoods, located near employment centers and characterized by walkable streets and upscale dining options, have seen a surge in high-rise and mid-rise developments.

Looking ahead, rental absorption is anticipated to catch up with the excess supply of units on the market by late 2025 as new deliveries continue to slow throughout the year. This shift is expected to pave the way for rent growth and occupancy rates to recalibrate to historical averages by 2026.

2025 RENT & OCCUPANCY TRENDS
ANNUAL RENT GROWTH & OCCUPANCY
OCCUPANCY TRENDS

As 2025 begins, Houston’s multifamily market is showing signs of stabilization. Mirroring national trends, demand in 2024 was the strongest since 2021, marking one of the best years on record. While newly delivered high-end properties accounted for the majority of absorption, the recovery in mid-tier properties has been particularly noteworthy. Over the past 12 months, mid-priced communities recorded 4,300 units of net absorption, a stark turnaround from the combined negative net absorption of 5,000 units in 2022 and 2023. Improved consumer sentiment, coupled with easing economic uncertainty and inflation, has likely unleashed pent-up housing demand, particularly within the mid-tier segment.

Despite strong net absorption, occupancy remains below historical averages due to the substantial influx of new units over recent years. The broader Houston metro’s average occupancy rate declined by 20 basis points year-over-year, settling at 90.5% by the end of 2024, below the 10-year average of 91.4%. Occupancy is projected to remain flat by the end of 2025, as lingering vacancies from 2024 temper what is otherwise expected to be a year where supply and demand approach equilibrium. However, if rental demand exceeds expectations in 2025, the market could see a meaningful improvement in Houston’s average occupancy rate by year-end.

RENT TRENDS

Rental growth has underperformed over the last two years in Houston due to a substantial influx of new supply; however, it remained positive in 2024. The surge in inventory has limited operators’ ability to implement rent increases, shifting their focus toward occupancy retention. Despite these challenges, rents maintained a modest upward trajectory, closing 2024 with a 0.7% year-over-year increase. While this figure falls well below Houston’s 10-year average rent growth of 2.4%, it offers reassurance to operators, as the market has largely avoided the steep rent cuts and concessions seen in other major Texas metros facing acute oversupply pressures.

However, Houston submarkets with significant inventory expansion have not been immune to rent reductions. Northern submarkets, such as Montgomery County and The Woodlands, experienced rent declines in recent quarters, although only 11 of Houston’s 35 submarkets recorded negative rent growth in 2024. Looking ahead, rent growth is expected to remain subdued in early 2025, particularly in areas contending with excess supply. However, nearly all submarkets are projected to see rent increases by year-end, with Neartown/River Oaks, and Richmond/Rosenberg expected to lead the market with gains around 4%, exceeding the metro-wide forecasted increase of 2.1%.

Submarket Rent & Occupancy

2024 INCOME & EXPENSE ANALYSIS

12-month period ending November 2024

CLICK TO VIEW FORECAST DATA

INCOME

INCOME
Income AssumptionsValue / UnitYear Change (%)
Occupancy (%)90.75%-0.6%
Rental Income / Occupied Unit$1,330.892.0%
Recoverable Expenses / Occupied Unit$83.319.4%
Other Income / Occupied Unit$82.75-1.1%
Total Income / Occupied Unit$1,496.95 2.2%
Operating Income
Rental Income$1,209.091.5%
Recoverable Expenses$75.698.8%
Other Income$75.18-1.6%
Total Income$1,359.951.7%

EXPENSES

EXPENSES
Operating ExpensesValue / UnitYear Change (%)
Payroll$142.332.2%
Marketing & Advertising$26.270.3%
Repairs & Maintenance$93.170.3%
Administrative$44.850.6%
Management Fees$41.100.7%
Utilities$92.360.7%
Real Estate & Other Taxes$212.06-6.3%
Insurance$99.7916.0%
Other Operating Expensees$3.82
Total Operating Expense$755.740.6%
Net Operating Income$604.213.0%
Please note that the income and expense data presented in this section is sourced from trusted third-party data providers and does not reflect the entire market. While we strive for accuracy, our firm does not provide any warranty or guarantee regarding the reliability or precision of this information. We recommend users exercise discretion and professional judgment when interpreting and utilizing this data.
MARKET OUTLOOK

The 2025 outlook for the Houston metro is defined by the beginning of market stabilization, supported by one of the nation’s most dynamic economies. Unemployment is projected to average 4.0%, with the addition of 47,400 new jobs—among the highest gains of any large metro—representing a 1.4% increase in employment. Houston’s young population, affordability, warm climate, low taxes, pro-business environment, and cultural diversity are expected to drive a 5.2% expansion in the employment base over the next five years, according to MMG’s 2024 Employment Expansion Trend Report. These factors solidify Houston’s position as a thriving economic hub and support sustained multifamily housing demand. Notable developments, such as the TMC3 campus at the Texas Medical Center, are poised to create 26,000 jobs, generate $5.2 billion in economic benefits, and add millions of square feet of health science-oriented space.

Looking ahead, Houston’s relatively low cost of living and high individual earning capacity compared to other large metros will help stabilize demand as the market continues to absorb recently completed apartment projects. The anticipated slowdown in new construction over the coming quarters is expected to mitigate pressure on occupancy rates and support stronger rent growth. By year-end 2025, rents are forecasted to grow by 2.1% year-over-year, highlighting Houston’s resilience and sustained market strength.

Disclaimer: This multifamily forecast incorporates data from reputable third-party sources, including Costar, Yardi Matrix, the U.S. Census Bureau, the U.S. Bureau of Labor Statistics, and ESRI. While we make every effort to ensure accuracy, we cannot guarantee the reliability of the projections provided. Forecasts are inherently subject to change due to evolving market conditions, economic factors, and unforeseen events. We strongly encourage users to conduct independent due diligence and consult with an MMG Advisor before making any investment decisions based on this information.

Featured Texas Research Reports:

To gain further insights into the Houston market, contact our local team:

Mike-Watson_Web

Michael Watson

Director of Revenue Production/Managing Director
Michael Moffit

Michael Moffitt

Managing Director
Mike Miller

Michael Miller

Managing Director
Derek Wilson

Derek Wilson

Senior Director
Mark-Diebold-Web

Mark Diebold

Senior Director
Alex-Thompson_Web

Alex Thompson

Senior Advisor
Thomas Rodriguez_400

Thomas Rodriguez

Associate Advisor
Link Browder

Link Browder

Associate Advisor
Chris Peck

Christopher Peck

Associate Advisor
Alex Blagojevich

Alex Blagojevich

Executive Managing Director / Co-Founder
Michael-Sullivan

Michael Sullivan

Executive Managing Director / Co-Founder

Have a question?
Send us a message!