Houston 2Q 2024 Market Report

MARKET SNAPSHOT

AVERAGE RENT

$1,327 2Q 2024

2Q 2024 RENT CHANGE

0.1%

OCCUPANCY RATE

90.9% 2Q 2024

ANNUAL OCCUPANCY CHANGE

-50 BASIS POINTS

QUARTERLY DEMAND

7,816 [YTD: 11,192]

QUARTERLY COMPLETIONS

7,528 [YTD: 13,223]

KEY TAKEAWAYS

  • During the critical spring leasing season, renters absorbed over 7,800 units, slightly surpassing the 7,528 units delivered in the same period. This marked the first time in 10 quarters that demand has exceeded supply in Houston.

  • Construction starts saw a notable decline in the first half of 2024, with only 1,100 units breaking ground, a significant drop from the 6,200 units initiated during the same period in 2023.

  • Institutional investors have significantly increased their activity in Houston this year, accounting for 28% of all purchases through the first six months of 2024.

Supply & Demand

2Q 2024

7,816 Units [YTD: 11,192]

QUARTERLY DEMAND

7,528 Units [YTD: 13,223]

QUARTERLY COMPLETIONS

Annual Demand vs Completions

Demand Trends

In the second quarter of 2024, the Houston apartment market experienced a significant surge in demand, with renters absorbing over 7,800 units during the critical spring leasing season. This increase in absorption slightly exceeded the 7,528 units delivered during the same period, marking the first time in 10 quarters that demand has outpaced supply. The Bear Creek/Copperfield and Northwest Houston submarkets led this trend, absorbing 2,137 and 1,868 units respectively over the past year, establishing themselves as the primary centers of demand.

Construction Trends

In the second quarter of 2024, Houston’s apartment inventory saw a notable expansion, with 7,528 units added. The Bear Creek/Copperfield area led this growth with a substantial completion of 2,912 units. Despite this significant increase in supply, the pace of new multifamily construction starts is markedly slowing. In the first half of the year, only 1,100 units began construction, a sharp decrease from the 6,200 units initiated during the same period in 2023.

Occupancy & Rent Trends

OCCUPANCY TRENDS

This surge was most pronounced in rapidly expanding areas such as Bear Creek/Copperfield and Northwest Houston. Conversely, submarkets that have received substantial new supply are experiencing the greatest pressure on occupancy rates. Meanwhile, regions like Liberty County, noted for their extensive inventory of workforce housing, continue to sustain higher occupancy rates. This situation underscores the impact of new supply, particularly at the higher end of the market spectrum, presenting notable challenges in Houston. Despite these fluctuations, the foundational drivers that underpin Houston’s multifamily market—such as leading population and employment growth, coupled with relatively affordable rents—remain strong, indicating a robust long-term outlook.

RENT TRENDS

In the first half of 2024, effective rents in the Houston apartment market remained relatively stable year-over-year, with a marginal increase of 0.1%, bringing the average rent for new leases to $1,327 by the end of the second quarter. This modest rise is primarily attributed to a rapid influx of new supply, rather than a reduction in demand. A detailed analysis across different submarkets and asset classes in Houston shows diverse performance dynamics. For instance, annual rent changes varied significantly, with a high of 4.5% increase in Austin County contrasted by a decline of 5.2% in Waller County. In high-priced urban areas like Downtown Houston, where rents average $2,305, rent growth has been sluggish, experiencing a year-over-year decline of 0.6%. Conversely, more affordable submarkets such as Liberty County and the Greenspoint/IAH Airport area, where rents are generally below $1,000, have seen accelerating rent increases.

$2,194

Average Monthly Mortgage Payment

$1,327

Average Monthly Rent

Submarket Rent & Occupancy

Submarket Construction Pipeline

Sales Activity

Preliminary data from MSCI reveals that the transaction volume for conventional, single-asset deals in Houston’s multifamily sector reached $792.8 million across 19 deals, reflecting a 33.5% decrease from the previous year. Notably, institutional investors have significantly increased their activity in Houston this year. After two years where their share of the buyer pool shrank to roughly 12%—historically, they averaged 20%—they made a substantial comeback, accounting for 28% of purchases through the first six months of 2024.

Institutional capital has been cautious over the past two years, often remaining on the sidelines. While it’s premature to declare a full resurgence, this uptick in investment activity by institutional buyers in the metroplex is encouraging. The underlying fundamentals that position multifamily as a preferred asset class in commercial real estate remain strong. Despite a temporary surge in supply, the multifamily market is undergoing a cyclical rather than a secular shift, aligning with the broader economic cycle’s ongoing dynamics.

  • City of Houston
  • Madera Equity
  • SB Properties
  • Aggarwal Investments
  • Cortland
  • Blackstone
  • Alliance Residential
  • Crow Holdings

*Most Active Buyers and Sellers are based on the sale volume of apartment units.

TRANSACTION VOLUME

$ 0 M

YTD TRANSACTION VOLUME

- 0 %

Y-O-Y CHANGE

0 YTD

INDIVIDUAL TRANSACTION COUNT

$ 0 k*

PRICE PER UNIT

- 0 %

ANNUAL PPU CHANGE

* Trailing 4Q average PPU

* Preliminary Data from RCA – Individual transaction $2.5M +

Houston's Fastest Growing Renter Demographic

Houston-The Woodlands-Sugar Land, TX Metro Area

Under 35 Years
35 to 44 Years
45 to 54 Years
55 to 64 Years
65 to 74 Years
75 to 84 Years
85 Years & over
0.1%
0.3%
-0.4%
0.1%
0.6%
0.4%
0.2%

The 65-74 age group is the fastest-growing renter demographic in the Houston, TX Metro area, showing a 0.6% growth from pre-pandemic 2019 to 2022. This trend indicates a rising demand for rental housing tailored to an aging population.

Sources: U.S Census; ESRI

Market Outlook

Long-term optimism about Houston’s multifamily market continues to thrive among investors and developers, bolstered by the city’s status as the fourth most populous in the U.S. Houston’s sustained dynamic growth is a magnet for a diverse array of business and corporations, making it a hub of economic activity and development. The city is home to 14 major colleges and universities, attracting a vibrant student population eager for housing. Additionally, young professionals are increasingly drawn to Houston’s robust energy sector, along with opportunities in the rapidly expanding fields of healthcare and biomedical research. Families, too, find Houston appealing due to its relative affordability, especially when compared to other major Texas cities like Dallas-Fort Worth and Austin. These factors contribute to a diverse foundation that supports continued demand in the multifamily sector. The metro’s economic diversity, coupled with ongoing cultural and infrastructural developments, ensures that Houston remains an attractive market for multifamily investments well into the future.

Sources: Costar; ESRI; MSCI; U.S. Census Bureau; Yardi Matrix

To Gain Further Insights Into The Houston Market Please Reach Out To Our local Team

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Michael Watson

Director of Revenue Production / Managing Director
Michael Moffit

Michael Moffit

Managing Director

Derek Wilson

Senior Director
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Mark Diebold

Senior Director
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Alex Thompson

Associate Advisor
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Tyler Salter

Associate Advisor
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Nathan Allison

Associate Advisor
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Thomas Rodriguez

Associate Advisor
Alex Blagojevich

Alex Blagojevich

Executive Managing Director / Co-Founder
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Michael Sullivan

Executive Managing Director / Co-Founder

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