HOUSTON – (By Kyle Hagerty for Realty News Report) – In the wake of Hurricane Harvey, tens of thousands of Houstonians were temporarily displaced, significantly disrupting multifamily market fundamentals such as absorption, vacancy and rent trends for more than a year. Two years after the storm, Houston’s multifamily sector is steadily normalizing as ongoing job growth and investor demand support the metro.
As one of the nation’s leading employment centers, Houston’s housing demand has increased. With the typical mortgage payment on a median-priced home running more than $600 higher than the average monthly rent, many residents of the Bayou City continue to rent, according to Institutional Property Advisors’ 2019 Midyear Multifamily Investment Forecast. Even so, Houston’s vacancy rate of 6.8% remains modestly above the national average of 5.5%.
Absorption and vacancy were both affected in 2018 as many apartment residents returned to their homes following recovery efforts. By the first half of 2019 those metrics had begun to improve, moving closer to long-term averages for the market. Renewed absorption should push vacancy below the trailing five-year average and support rent growth slightly above the national measure, Institutional Property Advisors reports.
Because relatively few apartment communities suffered catastrophic damage from Harvey, investor interest in Houston’s multifamily assets has remained healthy. Over the past 18 months the average capitalization rate has tightened from about 5.8% to roughly 5.3%, reflecting renewed investor confidence and a positive long-term outlook for the metro, according to Institutional Property Advisors.
From newly built infill mid-rise projects to suburban value-add garden-style properties and everything in between, Houston offers a broad range of acquisition opportunities across asset classes in America’s fourth-largest city.
New construction accounted for only 0.8% of Houston’s multifamily inventory—well below the 1.8% national average—so fundamentals are expected to strengthen through 2019, Institutional Property Advisors says. The slower pace of deliveries should ease downward pressure on vacancy and help sustain rent growth, moving Houston’s multifamily market closer to the historical averages typical of a growing city.
Aug. 22, 2019 Realty News Report Copyright 2019
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