Q2 2022 Multifamily Real Estate Report: Houston, TX
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Being the largest city in Texas, Houston has a large multifamily real estate market. Q2 2022 saw some interesting developments, as average rent prices continued to rise while investment sale volume attempted to stabilize following a record high in Q4 2021.
General Area Overview & Demographics
Houston is the largest city in all of Texas, with an estimated population of 2,228,250. This population number also puts Houston as the fourth-largest city in the United States, trailing behind only New York City, Los Angeles, and Chicago.
The median value of owner-occupied housing units from 2016 to 2020 in Houston was $186,800. The city has an unemployment rate of 4.3%, and the annual percentage change in employment was 6.1% in Q2 2022.
Summary of Houston Multifamily Real Estate Performance in Q2 2022
Q2 2022 saw an 80 basis-point increase in Houston’s overall occupancy rate compared to Q2 2021. Average monthly rent also increased during this time period.
In Q2 2021, average monthly rent in Houston was $1,188. In Q2 2022, average monthly rent in Houston was $1,248.
This represented a 5.1% increase in average monthly rent in Houston over the year. In Q1 2022, average rent for multifamily units was $1,212 per month, representing a 3.0% increase in average rent for multifamily units in Houston over the quarter.
What are multifamily rents like in Houston?
Overall demand in multifamily rents increased from Q1 2022 to Q2 2022. This quarter recorded 3,185 units of net absorption. Q1 2022 recorded 1,853 units of net absorption, as Q2 had a major increase. However, demand continues to be countered by the construction of new units.
Purchase & Leasing Activity
The first two quarters of 2022 have seen Houston’s multifamily investment sales volume drop from their previous record high in Q4 2021. Q2 2022 saw a multifamily investment sales volume of $3.2 billion, dropping all the way from its record high of $8.6 billion in Q4 2021.
While this number may appear concerning or disheartening, reported investment sales volume in Q2 2022 did represent a 37% increase from Q2 2021 while also increasing from Q1 2022.
In this situation, the record investment sales volume of Q4 2021 is likely an outlier going forward.
The median sales price per unit saw a 7.2% decrease from last quarter, falling from $136,646 in Q1 2022 to $126,786 in Q2 2022. This is in contrast to the Texas median sales price, which saw an increase of 1.2% quarter-over-quarter. The United States as a whole also saw an increase of 9.4% over the quarter as well.
Notable Multifamily Real Estate Deals in Houston in Q2 2022
One notable real estate deal in Q2 2022 was the sale of The Vineyard Trace Apartments. Located at 15414 Kuykendahl Road in Houston, the Vineyard Trace Apartments are comprised of 238 individual garden-style apartment units.
The entire property is spread out over 8.45 acres of land. Windmill Investments, LLC was the seller in the deal.
Brookeast Capital, LLC was the buyer in the deal. The Vineyard Trace Apartments are located in the Willowbrook area of Harris County and have many one, two, and three-bedroom units. The Willowbrook area of Harris County currently has a limited supply and above-market rent growth.
New Multifamily Real Estate Development Activity in Houston in Q2 2022
There are currently over 15,000 individual units under construction in Houston. This number is higher than the number of units that were constructed during the previous quarter, which totaled 13,656.
However, it’s lower than the number of units that were being constructed in Q2 2021, which was 16,396, representing a year-over-year decrease. Along with these units already under construction, another 35,000 have been proposed.
Market Forecast for Houston’s Multifamily Real Estate Market
Many aspects of multifamily real estate in Houston are likely to continue on their current trends. For example, the average rent price has seen an increase not only year-over-year but quarter-by-quarter as well.
This trend is likely to continue into Q3. Demand could increase as well, but investors should also keep an eye on the number of units under construction to see if that number continues to rise next quarter.
Takeaways for Multifamily Real Estate Investors
There are several key statistics that investors should watch as data for Q3 comes in.
One focus is the average rent price in Houston. Rents in Q2 showed not only a quarterly increase but a yearly increase as well.
Investors should be on the lookout for these rising statistics while also comparing them with falling statistics such as median sales price per unit.
Methodology
All figures presented in this article are based on MyEListing.com’s commercial real estate listing data in corroboration with other freely available data and information covering the commercial real estate industry.
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