Houston’s Population Growth Will Slow In The Short-Term, Curbing Multifamily Demand
Houston is among several U.S. metros expected to see a significant drop-off in migration for at least the next year, as the city continues to experience large job losses brought on by the combination of the coronavirus pandemic and low crude oil prices.
Prior to the pandemic, certain markets with lower costs of living like Houston, Phoenix, Charlotte, Las Vegas and Atlanta were experiencing significant population growth, correlating with strong job growth.
That trend could reset in the next year or two, as more expensive, weak-growth markets with highly educated populations may retain and attract more workers, according to new research from CoStar.
CoStar Managing Consultant Andrew Rybczynski told Bisnow that subdued population growth would mean rising vacancy rates in Houston’s multifamily sector, inevitably leading to a slower pipeline.
“Projects that are underway are particularly vulnerable, as they are likely seeing their construction timeline stretched and will probably deliver into a weak demand environment,” Rybczynski said.
“Twenty-five thousand units are underway in Houston right now compared to less than 10,000 in the fourth quarter of 2017. There’s a good chance that units underway number drops down by significant amounts again.”
From 2012 to 2016, year-over-year population growth in Houston ranged from 2% to 2.7%, according to Oxford Economics data. But since Q4 2016, year-over-year population growth has never exceeded 1.8%, and dipped as low as 1.2% in early 2018, Rybczynski said.
That growth recovered to 1.7% in Q1 2020, but given the massive loss of employment across all sectors, it’s likely that there will be lower population growth figures, he added.
Houston consistently ranks toward the top of large markets in terms of growth. Even when Houston is growing slowly — by Houston standards — it still grows quickly in relation to other large metros.
“We expect Houston’s growth to slow through this down cycle, but for it to maintain strong growth compared to other large metros like Los Angeles, New York or Chicago,” Rybczynski said.
It is likely that Houston will still continue to enjoy net in-migration, even if the growth slows. More people were looking to move to Houston between Jan. 1 and April 15 than to leave, according to the latest renter migration report from Apartment List.