Market Insights Summer 2024 Houston
Summer 2024
Average
Rent
Average
Occupancy
YTD Sales
Volume
YoY Rent
Change
The Houston-The Woodlands-Sugar Land Metropolitan Statistical Area (MSA) is home to approximately 7.6 million residents, making it the fifth most populous metro area in the United States and a central player in the economic and cultural landscape of Southeast Texas. Houston itself is the fourth largest city in the nation, with an estimated 2023 population of 2,344,651. The city has experienced a notable 12-month absorption of 15,000 multifamily units, which is about 10% above the pre-COVID five-year average, while new deliveries totaled 23,000 units. This performance reflects a significant rebound, particularly among 3 Star properties, driven by high-end luxury developments and an increase in rental concessions due to the previous year's oversupply.
The Houston Metro Area boasts the fourth-largest urban economy in the U.S., characterized by a diverse economic base that includes energy, healthcare, biomedical research, aerospace, and manufacturing. The city is recognized for its robust job growth, with over 210,000 jobs added since the pandemic, marking a 7% increase. Houston’s multifamily market, though impacted by a recent supply wave, shows signs of stabilization with rent growth having improved to 0.8% year-over-year as of Q2 2024. This is a modest rebound from previous years and indicates that the market may be on the mend. The Metro Area has 20,000 units currently under construction, with a significant portion of them in the high-end segment. Despite high vacancy rates in luxury categories, demand for affordable housing remains strong, and Houston’s relatively low rents compared to other major metros like Austin and Miami continue to attract new residents. With a median household income of around $77,000 and average rents of $1,350 per month, the market is positioned for future growth, supported by ongoing population expansion and economic diversification.
Source: GREA Research, CoStar
Employment
Houston continues to be one of the nation's stronger markets for employment growth, with the labor market now boasting over 210,000 more jobs than before the pandemic—a 7% increase. Last year marked the third consecutive year that Houston added more than 100,000 new jobs, though job growth is slowing, with projections suggesting around 70,000 new payrolls this year. The Houston metropolitan area, the nation's fifth-largest with a population of about 7.6 million, continues to attract new residents due to its young population, affordability, low taxes, and diverse culture.
While oil remains a key part of the economy, Houston is diversifying into sectors like healthcare, biomedical research, and aerospace, exemplified by the TMC3 project, which is expected to create 26,000 jobs and generate $5.2 billion in economic benefits. Houston also benefits from its proximity to Mexico, offering more flights to Mexico than any other U.S. metro, and from medical tourism, with the Texas Medical Center drawing patients from around the world.
| % ∆ from June 2023 | |||
|---|---|---|---|
| Metro Area Employment (Thousands) | June 2024 | Houston | National |
| Total Non-farm | 3464 | 2.3% | 1.6% |
| Mining and Logging | 72 | 2.0% | -1.4% |
| Construction | 244 | 5.3% | 2.8% |
| Manufacturing | 238 | 1.4% | 0.0% |
| Trade, Transportation, and Utilities | 688 | 0.2% | 0.7% |
| Information | 33 | -3.0% | -1.0% |
| Financial Activities | 190 | 1.8% | 0.3% |
| Professional and Business Services | 563 | 1.1% | 0.3% |
| Private Education and Health Services | 467 | 4.9% | 4.2% |
| Leisure and Hospitality | 369 | 0.6% | 1.7% |
| Other Services | 137 | 8.3% | 1.6% |
| Government | 459 | 3.8% | 2.6% |
Source: Bureau of Labor Statistics
Rental Market
In the first half of 2024, Houston's multifamily market exhibited strong demand, mitigating some of the previous supply-demand imbalances caused by a record high of new deliveries last year. Quarterly absorption surged to its highest level in nearly three years during 24Q2, surpassing the new supply for the first time since 21Q3. Over the past 12 months, Houston absorbed 15,000 units—approximately 10% above the pre-COVID five-year average—while 23,000 units were delivered. Despite the influx of new luxury properties driving much of the absorption, mid-tier properties also saw a notable rebound, with 2,700 units of net absorption in this segment. Concessions have been prevalent, particularly in the luxury market, where over 40% of properties offered concessions, a significant increase from previous years. Rent growth has slowed to 0.8% year-over-year, well below the market’s 10-year average, but recent trends indicate a possible recovery, with rents showing signs of improvement since December.
As of Q3 2024, average rents in Houston stand at $1,350, notably lower than in other major Sun Belt markets. With 20,000 units underway and a reduction in new construction starts, supply pressure is expected to ease, potentially leading to a more favorable market balance and improved rent growth by late 2025. Despite high current vacancies, particularly in the luxury segment, the long-term outlook remains positive due to Houston's strong population and job growth, relatively affordable rents, and continued economic diversification.
Average Monthly
Mortgage Payment
Average Monthly
Rent
Source: CoStar
Average Rent / Vacancy
Asking Rent / Bedroom
Multifamily Construction
Houston's multifamily construction market has experienced a notable shift in recent months, with evolving dynamics reflecting both the city's robust economic underpinnings and the challenges presented by a recent supply surge. Historically, Houston has been a significant player in the national multifamily sector, frequently leading in construction activity. However, the market has recently navigated through a phase of high supply and shifting demand.
In the first half of 2024, Houston's multifamily market showed resilience, with strong absorption rates narrowing the supply-demand gap caused by last year's record-high new supply. Notably, the second quarter of 2024 saw absorption reach its highest level in nearly three years, surpassing new supply for the first time since late 2021. Over the past year, approximately 15,000 units were absorbed, exceeding the pre-COVID five-year average by about 10%. This absorption rate contrasts with the delivery of 23,000 new units, a substantial increase from the 14,000-unit annual completion average observed between 2015 and 2019.
The influx of new luxury properties significantly drove this absorption trend, although mid-priced 3 Star properties also saw a marked rebound. Mid-priced communities absorbed 2,700 units over the past 12 months, a notable improvement compared to the combined negative absorption of 5,000 units recorded in 2022 and 2023. Concessions played a role in this shift, as generous offers attracted renters from lower-quality 3 Star properties to higher-end 4 and 5 Star units. This trend, combined with the impact of rising costs for essentials, influenced the budgetary constraints of many renters.
Multifamily Completions
Past 12 Months
Single Family
Permits
Median Single
Family Price
Completions / Net Absorption
Units by Submarket Delivering in 2024
Units Under
Construction
Units UC Delivering
in the Next 4 Quarters
| Submarket | Units Under Construction | % of Total UC | Units UC Delivering in Next 12 months |
|---|---|---|---|
| Neartown/River Oaks | 2,182 | 4.5% | 866 |
| Northwest Houston | 1,847 | 2.5% | 1,800 |
| Southeast Houston | 948 | 1.2% | 747 |
| Southwest Houston | 756 | 1.1% | 100 |
| Bear Creek/Copperfield | 1,276 | 3.6% | 2,526 |
| Westchase/Woodlake | 0 | 0.0% | 0 |
| Medical CenterWest University | 609 | 2.2% | 290 |
| Briar Forest/West Memorial | 645 | 2.1% | 115 |
| Galleria/Uptown | 420 | 1.7% | 114 |
| Cinco Ranch | 812 | 4.0% | 1,240 |
| Lake Houston Area | 343 | 1.3% | 626 |
| Sugar Land/Missouri City | 562 | 2.7% | 1,572 |
| The Woodlands | 714 | 4.1% | 371 |
| Heights | 2,353 | 19.6% | 391 |
| Brookhollow/Inwood | 338 | 1.3% | 619 |
| Spring Branch | 705 | 3.1% | 476 |
| Outlying Mongomery County | 718 | 5.3% | 672 |
| Greenspoint/IAH Airport | 293 | 1.4% | 20 |
| Downtown Houston | 229 | 3.3% | 710 |
| South Galveston County | 321 | 2.3% | 76 |
| Alief | 341 | 2.2% | 100 |
| North Galveston County | 112 | 1.1% | 449 |
| Pearland | 358 | 4.0% | 22 |
| Richmond/Rosenberg | 750 | 7.9% | 626 |
| South Brazoria County | 232 | 1.8% | 598 |
| Southeast Mongomery County | 883 | 15.8% | 212 |
| East End Houston | 501 | 8.3% | 348 |
| Baytown | 0 | 0.0% | 0 |
| South Central Houston | 0 | 0.0% | 0 |
| North east Houston | 304 | 8.8% | 28 |
| Waller County | 0 | 0.0% | 70 |
| Chambers County | 0 | 0.0% | 0 |
| Liberty County | 0 | 0.0% | 8 |
| Austin County | 0 | 0.0% | 13 |
Multifamily Sales
Sales volume in the Houston metro reached over $785 million in the first half of 2024, the highest first-half mark in two years. Capitalization rates have risen, with luxury properties now trading at cap rates around 4% to 5%, while three-star assets are closer to 5% to 6%. This represents a significant increase from the peak levels of early 2022. Despite these challenges, Houston's multifamily fundamentals remain strong.
The city's ongoing population and employment growth, combined with high mortgage rates pushing many potential homeowners toward renting, support long-term market performance. The demand for affordable housing and a relative shortage of new supply further underpin the market’s resilience.
YTD Transaction Volume
12 Mo. YoY Change
12 Mo. Market Price/Unit
Average Sales PPU / Cap Rate
Interest rate volatility and the elevated cost of debt have contributed to softened values and increased capitalization rates in Houston’s multifamily market.
Team
Abraham Garza III
Founding Partner
Jordon Emmott
Founding Partner
Shayan Hasnain
Founding Partner
Jamie Harrington
Senior Managing Director
Ryan Mendez
Senior Managing Director
Ryan Armstrong
Senior Managing Director
Charles Emmott
Director
Travis Clark
Director
Jackson Naponic
Director
Lucas Fertitta
Director