The multifamily construction boom is finally catching up to Houston. Without the job growth to keep up, multifamily rents have decreased 14% from July to August. With numbers like that, it's critical to stay abreast of market developments, so be sure not to miss Bisnow's Houston Multifamily Event on Aug. 24.
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According to an Aug. 5 report from the US Department of Labor, the US economy added 255,000 jobs in July. It’s the second straight month of strong employment growth, a stable unemployment number, and an increase in wages. Such encouraging national figures come after a spring of weaker-than-expected growth and seem to point to an increasingly healthy US economy.
But Houston’s economy, though diverse, is still dominated by the energy sector. A slight drop in jobs, coupled with a surplus of housing, might explain July's huge rent drop, from $1,521 per month to $1,306, according to data from ABODO.
"With construction at its highest level since the 1980s, we believe that a steady decline in rent prices in major metro areas like Houston may be on the way. Developers delivered 250,000 new rentals [nationwide] in 2015, and the forecast is for 285,000 more units to be finished in 2016. As we've seen in the past, as vacancy increases and more rental units become available, prices should begin to decrease," said Abodo's Sam Radbil. "It's a game of supply and demand and new developments will ultimately come to market and provide ample supply in Houston.”
Houston joins two cities in Ohio at the top of the list of decreasing rents. Cleveland’s average price for a one-bedroom fell 9% to $564, and Toledo saw a similar drop of 8% to $533.
Houstonians know the folly of trying to paint the town with one brush. While data does show decreasing rents as a whole, Houston is not a city defined by the whole. Multifamily rents in many submarkets are increasing, like in Downtown Houston, despite its burgeoning pipeline. According to Alliance Residential's Cyrus Bahrami (a speaker at our event), that's because the majority of deliveries are luxury units.
Alliance Residential has taken advantage of Houston's Downtown Living Initiative, recently opening Block 334, a five-story 207-unit luxury asset at 1515 Main St. The program reached its 5,000-unit cap last year. Will Downtown be spared from the rent softening as more deliver?
Houston's multifamily market is raising serious questions. Hear answers from top experts at Bisnow'sHouston Multifamily Event. Sign up here.
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