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Apartment Rents Drop in Houston, Bucking National Upward Trend

Greg Willett

Greg Willett

(By Dale King) HOUSTON – If you’re looking for an apartment at a decent price, best you point your feet in the direction of the Bayou City – Houston.

A new report says apartment rents are rising virtually everywhere in the US, but in Houston, rent hikes have slowed to a snail’s pace – if at all. Decreases are being seen in some of the charges for apartment units in the southeast Texas metro market.

MPF Research, the apartment data division of Carrollton, Texas-based RealPage Inc., just issued its quarterly report that looks at rents in the nation’s 100 largest cities. “While rents are growing in most cities across the country, they are slowing in Houston, which has been battered by the oil slump,” says MPF Research.

“As a result, Houston’s apartment rent growth now has experienced one of the largest year-over-year declines nationally,” another study found.

“Houston’s current pricing is weak. Rent growth is close to disappearing due to slowing economic growth occurring alongside aggressive apartment construction,” according to MPF Research. “In fact, actual price cuts have emerged in several of the neighborhoods adding the most supply.”

“In third quarter 2016, Houston’s annual rent growth did decline. The market experienced a 0.7% dip,” MPF researchers found. “While only a slight decrease, it is the first time a decline has happened in six years. In the same quarter of last year (third quarter 2015), annual rent growth hit 4.8%.”

For the third quarter of 2016, nearly every submarket among those adding the most annual supply (1,000+ units) experienced annual rent declines. Those matching this criteria (1,000+ units and rent declines) included:

  • Downtown/Montrose/River Oaks, -7.6% rent growth
  • West University/Medical Center/Third Ward, -8.9% rent growth
  • Greenway/Upper Kirby, -4.9% rent growth
  • Greater Heights/Washington Avenue, -6.5% rent growth
  • Memorial, -2.8% rent growth
  • Sugar Land/Stafford, -0.5% rent growth
  • Rosenberg/Richmond, -0.2% rent growth

The report says Sacramento ranks as the country’s rent growth leader, with pricing for new-resident leases climbing 11.6% during the past year. No Texas communities were in the top five on the rent hike chart.

On the other end, Houston ranked Number 5 on the list of cities with the biggest drop in apartment rents, behind San Jose, San Francisco, Oakland and Denver.

U.S. rental apartment occupancy reached 96.5% in third quarter 2016. Up from 96.2% a year ago, the reading is just shy of the all-time peak of 96.8% set in the tech boom period of 2000.

“Many properties, especially those at the middle-tier price point, are completely full,” said Greg Willett, chief economist for RealPage Inc. “While an upturn in high-end deliveries is yielding more product availability in select spots, most new projects are moving quickly through the initial lease-up process.”

“The Texas markets all are performing differently right now,” said Willett, offering the following observations on the state of the Lone Star State:

  • “Dallas-Fort Worth performance is at an all-time high of 6.1% annual rent growth. In the previous cycle, annual growth never topped 5%.”
  • “Austin’s annual rent growth pace cooled a bit to 3.4% as of third quarter, after having been running at roughly 5%. Our best case scenario assumes pricing power should regain some momentum, but there is some concern that employment growth is cooling, too.”
  • “San Antonio’s annual rent growth of 2.6% is pretty typical of the long-term norm in that market and, likewise, is similar to what the market has been doing of late.”

Nov. 10, 2016 Realty News Report Copyright 2016

 

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