Q4 2022 Multifamily Real Estate Report: Houston, TX

Published: 06-05-23    Category: General CRE

Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.

Q4 2022 Multifamily Real Estate Report: Houston

Houston is known for its family-friendly attractions, such as the Children’s Museum of Houston, the Houston Zoo, and the Space Center Houston. It’s also well-known for its highly active energy sector.

At the close of 2022, unemployment in the city declined to 3.8%. Its metro area population increased 1.73%, going from 6.49 million to 6.6 million in 2022.

Houston’s multifamily real estate market saw negative absorption, declining occupancies, and decreasing rents in Q4 2022.

General Area Overview & Demographics

With a population of approximately 2.3 million, Houston is one of the most populous cities in the United States. According to the United States Census Bureau, the city’s population demographics consist of 23.7% White, 22.9% Black or African American, 44.8% Hispanic or Latino, and 7.2% Asian.

Houston, TX Median Household Income & Population

Median household income in Houston is approximately $50,000 per year, but the income distribution is not evenly spread across the city. Certain neighborhoods, such as River Oaks, West University, and Memorial, are known for their affluent residents and higher household incomes than other areas. Many residents in the city struggle to keep up with monthly rent payments.

Age demographics in this city are diverse, with a median age of 33.5 years. A significant proportion, over 37% of residents, are under 25, contributing to the city’s youthful vibe. Moreover, there is a growing population of retirees who are attracted to the city’s warm weather, affordable cost of living, and high-quality healthcare facilities.

Several institutions, including the University of Houston, Texas Southern University, and Rice University, provide higher education opportunities in Houston. These universities offer a range of undergraduate and graduate programs in various fields of study. Additionally, Houston has many vocational schools, community colleges, and technical schools for those seeking specialized training.

The Space Center is a popular destination for those interested in space exploration, featuring exhibits and artifacts from NASA’s space program. The Houston Museum of Natural Science is also well-known, with exhibits on many things, from dinosaurs to ancient Egypt. Other popular attractions in Houston include the Buffalo Bayou Park, the Houston Arboretum and Nature Center, and the Gerald D. Hines Waterwall Park.

The climate is generally warm and humid, with mild winters and hot summers. In the summer, temperatures can soar up to 90°F or higher, accompanied by high humidity levels. Thunderstorms are frequent during this season, and the city is occasionally affected by hurricanes and tropical storms. However, the winter months are generally pleasant, with temperatures ranging from the mid-50s to mid-60s.

Summary of Houston Multifamily Real Estate Performance in Q4 2022

Occupancy rates for Houston multifamily real estate declined quarter-over-quarter from 90.9% in Q3 2022 to 90.7% in Q4 2022, halting Q2 2022’s upward trend.

Class A builds were the only property type to see an increase in occupancies from Q3 2022, going from 87.4% in Q3 to 87.9% in Q4. Class B and C space both declined.

Multifamily absorption was negative, posting around -770 units absorbed, while Q3 had a positive absorption of about 63. The only property type to record positive absorption was Class A at 1,800 units.

What are multifamily rents like in Houston?

Q4 2022 Multifamily Real Estate Report: Houston, TX

Average monthly rent for Houston multifamily real estate fell from $1,262 per month in Q3 2022 to about $1,251 in Q4 2022.

Average monthly rents for each property type is as follows: Class A, $1,750; Class B, $1,245; and Class C, $957.

Central Houston’s submarkets averaged the highest rents ($1,876) while the Northeast submarket had the lowest ($1,040).

Purchase & Leasing Activity

Sales volume for Houston multifamily real estate dropped from nearly $9 billion in Q4 2021 to $1.6 billion in Q4 2022.

Average sales price per unit rose quarter-over-quarter from $120,000 to $160,000. In comparison, the average sales price for units statewide and nationwide decreased over the same period of time.

Total annual sales volume for Houston multifamily in 2022 reached $10 billion.

Notable Multifamily Real Estate Deals in Houston in Q4 2022

There were several notable deals that occured for Houston multifamily real estate in Q4 2022:

These are select examples among other activity.

New Multifamily Real Estate Development Activity in Houston in Q4 2022

Houston multifamily real estate saw 1,280 new units come online in Q4 2022, a decrease from Q3’s 3,100 units. That brought 2022’s total inventory to 720,600 at the close of 2022.

Market Forecast for Houston’s Multifamily Real Estate Market

Q4 2022 Multifamily Real Estate Report: Houston, TX

After 2021 posted a record year, 2022 showed signs of deceleration.

That said, Houston’s multifamily market was still healthy overall in Q4 2022. We still anticipate solid performance throughout 2023 even as the market moderates from historic highs.

An eye should be kept on interest rates as those will impact trends.

Takeaways for Multifamily Real Estate Investors

Houston’s multifamily real estate market stalled in Q4 2022, but its strong economy and growing population provide the fundamentals for continued growth.

Do your research, stay diligent, and happy investing.

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