HOUSTON – (By Dale King, Realty News Report) – Rent increases in Houston have been rare lately, and the same holds true for many other Texas metropolitan areas that were hit by the coronavirus pandemic.
Bruce McClenny, president of ApartmentData.com, compiled data from a difficult 2020 and offered a cautiously optimistic outlook for the remainder of this year and beyond.
“I’m predicting rent growth of 1.5% for Houston this year,” he said during a recent presentation to the Houston Apartment Association. “It’s not spectacular, but it’s positive. Recovery will take some time,” he added, expecting stronger performance in 2022.
McClenny also projected a 2% job increase in Houston for the year—about 60,000 new jobs—along with delivery of 14,000 new apartment units, absorption of 10,000 units, and an average occupancy rate of 88.5% for the rest of the year.
Key takeaways from McClenny’s presentation included:
- “Through December, the Houston apartment market has declined by $21, or -2.0%, since March. Class A performed worst, falling $104 or -6.7% since March. Class B declined $11 or -1.1%. Class C dropped $3 or -0.4%, while Class D lost the least at $2 or -0.3% since March. Overall, it’s been a tough year for the Houston market.”
- “2020 has been the worst year for rent growth in recent history—the only negative performance in the past six years.”
- “Houston’s absorption since March has actually been better than expected, with 11,300 units absorbed versus 14,200 in 2019 and better than the 8,700 absorbed in 2018.”
The charts shown during the presentation indicated Houston rents declined $21, or -2%, for the 12-month period from January 1, 2020 through December 31, 2020. For the period from March 31, 2020—when the pandemic’s effects intensified—through the end of the year, rents decreased by $12, or -1.7%.
McClenny noted that rents in all Texas metros were trending upward at the start of 2020, but that momentum reversed after March.
“For the rest of the year after March 2020, rents moved downward in all the metros,” he said.
“This is a worldwide problem,” he observed. He identified Austin as the hardest-hit major Texas market, with every rent class registering losses; Class A properties in Austin dropped $137, or 8.1%.
McClenny said Austin and Orlando, Florida, experienced similar severe declines.
San Antonio fared best among the large Texas cities. Overall rent rose by $6 there, and only Class A and Class D properties recorded declines.
Dallas-Fort Worth also performed relatively well, according to ApartmentData.com, with only Class A properties showing a negative result—about -2.4%.
McClenny reviewed Houston’s rent payment trends over the past six years. Rents rose by $44 in 2015, the year that marked the beginning of downturns tied to the fracking slowdown. Energy sector challenges kept 2016 growth essentially flat.
2017 was a volatile year but ended with a $43 increase in average rent. McClenny attributed much of that increase to Hurricane Harvey, noting that roughly $28 of the $43 jump in 2017 was driven by storm-related housing damage and displacement.
Rent increases in Houston were $12 in 2018 and $27 in 2019. Then, in 2020, the market reversed course sharply.
Comparing present conditions to the Great Recession a decade earlier, McClenny said the figures during the prior downturn were somewhat stronger both in dollars and percentage changes.
Among Houston’s 42 submarkets, the bottom 12 saw rents drop an average of 5.8%. The middle 12 submarkets held nearly flat with a modest gain of 0.3%.
The top 12 submarkets recorded more solid results. McClenny identified Richmond/Rosenberg as the leading area with 5.6% rent growth. Other top performers included FM 1960 East/IAH Airport at 4.6%, Northline at 3.6%, and Inwood/Highway 249 up 3.5%.
Feb. 9, 2021 Realty News Report Copyright 2021
File: Class A Gets an F in Houston apartment market rents
File: (2) Houston. Multifamily. Class A Gets an F in Houston apartment market rents. Bruce McClenny, president of ApartmentData.com.