Houston 3Q23
Multifamily Market Report

$1,367

average rent

93.0%

average occupancy rate

$1.5B

ytd sales volume

0.6%

YoY rent change

-0.8 POINTS

yoy occupancy change

40

ytd individual transactions

Supply & Demand

3Q23

6,276 Units

QUARTERLY DEMAND
YTD: 12,242

6,351 Units

QUARTERLY COMPLETIONS
YTD: 14,004

Annual Demand vs Completions

2018
3,094
9,623
2019
14,902
9,752
2020
12,572
19,288
2021
37,307
16,837
2022
-8,915
14,850
2023 YTD
12,242
14,004
  • Planned
    Completions
  • Pre-Planned
    Demand

Demand Trends

  • The Houston apartment market regained its stride, reflecting the metro’s characteristic robust seasonal demand. In Q3 2023, a commendable 6,276 units found new occupants, driving the cumulative demand for the year to 12,242 units. This aligns with Houston’s historical average for absorption up to the third quarter.

 

  • When dissecting the data at the submarket level, the past year showed heightened demand in regions marked by a concentration of completions. Prominent among these were Rosenberg/Richmond, Downtown/Montrose/River Oaks, Conroe/Montgomery County, Katy, and Cypress/Waller.

Completion Trends

  • The Houston market witnessed a significant influx of new units in 2023. By the close of the third quarter, as many as 14,004 units were introduced, marking a historical high for this timeframe.

 

  • In terms of geographical distribution, the bulk of this new supply was centered in key submarkets. Rosenberg/Richmond, Conroe/Montgomery County, Katy, and Cypress/Waller emerged as the primary recipients of these fresh additions.

Demand Outlook

  • The forecast for the Houston apartment market over the next four quarters strikes a balanced note. While net absorption is expected to remain in line with historical trends, it’s anticipated that the influx of new units will overshadow demand.

 

  • However, a silver lining exists: the constrained single family housing conditions in the region may act as a supportive factor, potentially boosting the apartment market’s performance.

New Supply Outlook

  • The Houston apartment market is gearing up for a notable influx of new units. As of the close of the third quarter, a significant 33,651 units were under construction. Within the next year, a substantial 24,872 of these units are set to be introduced to the market.

 

  • The submarkets of Rosenberg/Richmond, Katy, and Spring/Tomball are poised to be the primary recipients of these new deliveries.

Occupancy & Rent Trends

RENT VS OWN
MONTHLY PAYMENT

$2,625

Average Monthly Mortgage Payment

$1,367

Average Monthly Rent

Occupancy trends

As of the third quarter in 2023, the overarching occupancy rate for apartments in Houston stood at a respectable 93.0%. This figure is aligned with the market’s historical mean of 92.7%. In terms of the class segmentation, Class A apartments showed the strongest occupancy, clocking in at 93.5%. This rate slightly surpassed the figures for both Class B and Class C units, which were 93.0% and 92.6% respectively. From a submarket perspective, the highest occupancy levels were observed in West University/Medical Center/Third Ward, Gulfton/Westbury, and Sugar Land/Stafford. Each of these regions boasted rates of 94.4% or even higher. On the other end of the spectrum, submarkets such as Far West Houston, Pasadena/Southeast Houston, Baytown, Braeswood Place/Astrodome/South Union, and North Central Houston reported occupancy levels trailing below the 92% mark. These figures emphasize the nuances and distinct dynamics across Houston’s varied submarkets.

RENTAL TRENDS

Houston’s rental market witnessed subdued growth in the third quarter of 2023. The broader Houston-The Woodlands-Sugar Land region saw a modest 0.6% annual increase in new lease rents. When breaking down by product classes, Class A units registered an uptick of 0.8%, Class B units trailed slightly at 0.4%, and Class C properties led the pack with a 0.9% growth.

In terms of geographical rent dynamics, submarkets with limited new supply, such as Sharpstown/Fondren Southwest, Alief, and North Central Houston, exhibited the most robust rent growth. This emphasizes the inverse relationship between supply and rent escalation. It’s noteworthy that 11 out of Houston’s 35 submarkets experienced a dip in annual effective rent in the year-ending third quarter, indicating pockets of potential oversupply or other localized factors affecting demand.

Submarket Rent & Occupancy

SubmarketAverage OccupancyAnnual Occupancy ChangeAverage Monthly RentAnnual Rent Change
Downtown/Montrose/River Oaks93.1%0.8% $2,113 -0.2%
West University/Medical Center/Third Ward94.8%0.5% $2,031 2.4%
Greenway/Upper Kirby93.1%0.1% $2,063 1.0%
Greater Heights/Washington Avenue93.3%-0.6% $1,831 -0.3%
East Inner Loop94.2%1.9% $1,439 1.2%
Braeswood Place/Astrodome/South Union91.8%-0.5% $1,366 -1.8%
Galleria/Uptown92.6%-0.4% $1,500 -1.3%
Westchase92.0%-1.3% $1,194 0.9%
Memorial93.9%1.3% $1,744 0.6%
Spring Branch93.2%-1.8% $1,265 0.6%
Northwest Houston93.0%-0.8% $1,066 3.3%
North Central Houston91.8%-2.4% $975 4.6%
Northeast Houston93.0%0.7% $1,178 -0.2%
Pasadena/Southeast Houston91.7%-1.0% $1,061 1.7%
Hobby Airport93.0%-0.8% $971 2.9%
Gulfton/Westbury94.6%-1.4% $1,062 2.1%
Sharpstown/Fondren Southwest93.8%-1.8% $939 6.3%
Alief93.7%0.1% $1,065 5.3%
Far West Houston91.5%-1.1% $1,255 0.2%
Bear Creek93.3%-0.4% $1,329 1.1%
Katy94.0%-0.8% $1,557 -0.6%
Cypress/Waller92.2%-2.2% $1,531 -1.8%
Champions West93.1%-0.9% $1,320 1.0%
Champions East92.1%-0.8% $1,100 2.6%
Spring/Tomball93.4%-1.3% $1,415 0.0%
The Woodlands93.7%-0.5% $1,546 -1.5%
Conroe/Montgomery County93.1%-1.6% $1,273 -1.1%
Humble/Kingwood92.0%-2.1% $1,349 0.1%
Baytown91.8%-1.9% $1,109 1.3%
Clear Lake93.4%-0.2% $1,303 0.8%
Galveston/Texas City92.4%-1.7% $1,271 2.5%
Friendswood/Pearland93.3%-0.7% $1,485 0.3%
Brazoria County92.2%0.0% $1,109 1.0%
Sugar Land/Stafford94.4%-0.1% $1,501 -0.5%
Rosenberg/Richmond93.0%-1.0% $1,449 -0.5%

Units by Submarket Delivering in 2023

33,651

Number of Units Under Construction

24,872

Number of Units UC Delivering In the Next 4 Quarters

Units Under Construction

Addison/Bent Tree - 730
0%
Allen/McKinney - 10,987
0%
Burleson/Johnson County - 1,506
0%
Carrollton/Farmers Branch - 964
0%
Central Arlington - 651
0%
Central/East Plano - 1,922
0%
Denton - 4,298
0%
East Dallas - 1,086
0%
East Fort Worth - 0
0%
Ellis County - 1,538
0%
Far East Dallas - 56
0%
Far North Dallas - 897
0%
Frisco - 8,222
0%
Garland - 1,726
0%
Grand Prairie - 3,390
0%
Grapevine/Southlake - 0
0%
Haltom City/Meacham - 730
0%
Hunt County - 152
0%
Hurst/Euless/Bedford - 395
0%
Intown Dallas - 3,7285
0%
Intown Fort Worth/University - 2,089
0%
Kaufman County - 1,601
0%
Las Colinas/Coppell - 1,914
0%
Lewisville/Flower Mound - 2,357
0%
Love Field/Medical District - 1,253
0%
Mesquite - 0
0%
North Arlington - 324
0%
North Dallas - 571
0%
North Fort Worth/Keller - 1,705
0%
North Irving - 0
0%
North Oak Cliff/West Dallas - 1,408
0%
Northeast Dallas - 893
0%
Northeast Fort Worth/North Richland Hills - 678
0%
Northwest Dallas - 0
0%
Oak Lawn/Park Cities - 937
0%
Richardson - 1,095
0%
Rockwall/Rowlett/Wylie - 2,609
0%
South Arlington/Mansfield - 570
0%
South Fort Worth - 3,092
0%
South Irving - 0
0%
Southeast Dallas - 0
0%
Southern Dallas County - 65
0%
Southwest Dallas - 866
0%
Southwest Fort Worth - 0
0%
The Colony/Far North Carrollton - 1,772
0%
West Fort Worth/Parker County - 2,633
0%
West Plano - 0
0%
Zang Triangle/Cedars/Fair Park - 840
0%

Units Delivering Next 4Q

Addison/Bent Tree - 512
0%
Allen/McKinney - 5,523
0%
Carrollton/Farmers Branch - 727
0%
Central/East Plano - 1,385
0%
Denton - 2,455
0%
East Dallas - 568
0%
SubmarketUnits Under Construction% of Total UCUnits UC Delivering In the Next 4 Quarters
Downtown/Montrose/River Oaks2,0956%1,438
West University/Medical Center/Third Ward1340%0
Greenway/Upper Kirby5112%302
Greater Heights/Washington Avenue1,8526%880
East Inner Loop1,9366%1,706
Braeswood Place/Astrodome/South Union00%0
Galleria/Uptown1721%0
Westchase2211%81
Memorial6342%394
Spring Branch1,7255%530
Northwest Houston1,0403%639
North Central Houston2401%240
Northeast Houston1660%166
Pasadena/Southeast Houston3401%340
Hobby Airport6992%699
Gulfton/Westbury3321%332
Sharpstown/Fondren Southwest00%0
Alief4611%120
Far West Houston00%0
Bear Creek1,6885%1,688
Katy3,24010%2,599
Cypress/Waller1,8335%1,305
Champions West6102%610
Champions East3361%336
Spring/Tomball3,0529%2,106
The Woodlands1,1413%711
Conroe/Montgomery County1,7595%1,346
Humble/Kingwood1,0693%917
Baytown00%0
Clear Lake1,0313%813
Galveston/Texas City2961%296
Friendswood/Pearland1110%0
Brazoria County6032%393
Sugar Land/Stafford1,3444%965
Rosenberg/Richmond2,9809%2,920
Houston33,651100%24,872

Sales Activity

In 2023, the Houston multifamily market observed a marked reduction in transactional activity. Dollar volumes for single asset conventional multifamily sales totaled approximately $1.5 billion through the third quarter, reflecting a substantial 75% decline from the corresponding period the previous year. This drop was further emphasized by a significant decrease in the number of transactions, with over 100 fewer deals made compared to last year. In total, only 40 apartment properties exchanged ownership this year. From a pricing perspective, the average price per unit for Houston apartments was approximately $147,100. This figure indicates a 7% annual dip. When contrasted with broader regional and national metrics, Houston’s average price per unit was notably lower. Specifically, the price was about 25% beneath the average for the Southern region, which stood at $197,200, and was around 33% below the U.S. national average of $219,700.

  1. Applesway Investment Group
  2. SB Properties
  3. 29th Street Capital
  4. Aspen Oak
  5. Civitas Capital Group
  1. Alliance Residential
  2. Wood Partners
  3. Crow Holdings
  4. Allen Harrison Company
  5. Cortland

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

TRANSACTION VOLUME


YTD Transaction Volume


Y-O-Y Change


Individual Transaction Count


Price Per Unit


Annual Price Change

* Transaction data is for the whole Metroplex

* Trailing 4Q average PPU

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

Economy

Between August 2022 and August 2023, Houston’s labor market exhibited dynamic growth across multiple sectors, according to BLS data. The Trade, Transportation, and Utilities sector led the surge, adding 25,500 positions, a 3.8% increase from the previous year. This was closely followed by the Education and Health Services sector, which expanded by 22,600 jobs, representing a robust 5.3% growth. Other notable sectors include Professional and Business Services with an additional 11,500 roles, and Financial Activities, which grew by 4.4%, adding 8,000 jobs. Despite the overall positive momentum, the Construction sector faced challenges, witnessing a decrease of 6,800 jobs or a 3.0% contraction. Overall, Houston’s employment landscape underscores its resilience and diverse economic foundation.

87.6K

August Annual Jobs Created

2.7%

August 2023 Employment growth

4.9%

August 2023 Unemployment rate
3.8% us August rate

Top 5 Employment Sector Annual Change

Trade, Transportation & Utilities

Trade, Transportation & Utilities

Change from August 2022 to August 2023:
25,500

Percent Change:
3.8%

EDUCATION & HEALTH SERVICES

Education & Health Services

Change from August 2022 to August 2023:
22,600

Percent Change:
5.3%

Professional & Business Services

Professional & Business Services

Change from August 2022 to August 2023:
11,500

Percent Change:
2.1%

Leisure & Hospitality

Leisure & Hospitality

Change from August 2022 to August 2023:
8,400

Percent Change: 2.4%

FINANCIAL SERVICES

Financial Services

Change from August 2022 to August 2023:
8,000

Percent Change:
4.4%

Hover over icons to view data
SectorChange from August 2022 to August 2023 Percent Change
Trade, transportation, and utilities25,500 3.8%
Education and health services22,600 5.3%
Professional and business services11,500 2.1%
Leisure and hospitality8,400 2.4%
Financial activities8,000 4.4%
Manufacturing7,200 3.2%
Government6,600 1.6%
Mining & logging3,500 5.3%
Other services1,000 0.8%
Information100 0.3%
Construction(6,800)-3.0%

Cost of Living Comparison

Living in Houston presents a more affordable option compared to Dallas. Specifically, Houston residents enjoy a 14.9% lower housing cost and spend 10.2% less on utilities. While transportation costs are slightly higher by 6.4% in Houston, groceries and health expenses are respectively 1.6% and 16.0% lower than in Dallas. With a median home sales price of $333,000 and average rents at $1,367, Houston offers a balanced blend of cost advantages in key living expenses.

Dallas, TX vs. Houston, TX
Cost of Living Comparison
Groceries:

1.6% Less
Housing:

14.9% Less
Utilities:

10.2% Less
Transportation:

6.4% More
Health:

16.0% Less
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Cost of Living Index

92.3

Index Score

Average Mortgage

$3,625

vs Average Rent: $1,367

Housing

88.7

Index Score

Utilities

102.4

Index Score

Gas

84.9

Index Score

Median Home Sales Price

$333,000

The “Cost of Living” index score provides a comparative assessment of the relative expense involved in maintaining a standard of living in a specific area, benchmarked against a national index score of 100.

Source: COLI; BLS; Consumer Price Index for All Urban Consumers (CPI-U): Selected areas, all items index, July 2023

Market Outlook

Houston’s multifaceted economic transformation, which expanded beyond the energy sector, brought forth gains for the Houston apartment market. Yet, looming challenges on the horizon cannot be ignored. A testament to Houston’s rapid growth, the metro is set to retain its position as a national frontrunner in construction, with an impressive 24,872 apartment units earmarked for completion in the upcoming year. These new deliveries will be predominantly concentrated in the Rosenberg/Richmond, Katy, and Spring/Tomball submarkets. Consequently, a considerable period might be needed apartment operators can push pricing the owners are use to seeing in Houston. However, there’s a silver lining: the constrained availability in the single-family housing sector could bolster demand for Class A apartments.

In the short term, challenges such as these may position Houston’s occupancy and rent growth metrics at the bottom spectrum nationally throughout 2024. Yet, the future looks promising. Post-2024 projections suggest that Houston could align with national averages. Still, it’s crucial to note that, relative to other Sun Belt regions, Houston’s market showcases greater volatility. As such, stakeholders and investors should exercise caution and conduct thorough market analyses before making significant decisions.

Sources:RealPage; BLS; MSCI; The Council for Community And Economic Research (C2ER)

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

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Mike Watson

Managing Director

Michael Moffit

Managing Director