HOUSTON – (By Kyle Hagerty for Realty News Report) – Tens of thousands of Houstonians were displaced after Hurricane Harvey devastated the region, skewing multifamily fundamentals like absorption, vacancy and rental rates for more than a year. Two years out, the multifamily market is beginning to return to normal as steady employment and investor interest continues to bolster the metro.
As a top employment metro in the United States, the need for housing in Houston has risen. With the typical mortgage payment on a median-priced home more than $600 above the average monthly rent, many across the Bayou City are leasing apartments, according to Institutional Property Advisors 2019 Midyear Multifamily Investment Forecast. Still, Houston’s 6.8% vacancy is slightly higher than 5.5% US average.
Houston’s absorption and vacancy numbers took a hit in 2018 as many occupying apartments in the wake of Harvey moved back into their homes. Through the first half of 2019, both of those metrics are rising, now closer to the average rate expected from the metro. Renewed absorption will help lower vacancy below the trailing five-year average and sustain rent growth slightly above the U.S. measure, according to Institutional Property Advisors.
With relatively few apartments receiving massive damage from Harvey, investors have maintained a healthy interest in every asset class. Over the past 18 months, the average cap rate has trended downward from 5.8 to 5.3%, reflecting the renewed investor interest in the Houston metro and positive long-term outlook, according to Institutional Property Advisors.
From brand new infill mid-rise development to suburban value-add garden properties and everything in between, acquisition opportunities offer a wide range of investment options in America’s fourth largest city.
New construction totaling just 0.8% of Houston’s total multifamily inventory, below the 1.8% U.S. average, means Houston’s fundamentals are expected to improve over the course of 2019, according to Institutional Property Advisors. The construction slowdown will relieve downward pressure on vacancy and rent growth, bringing Houston’s multifamily market closer to the historic averages expected from growing city.
Aug. 22, 2019 Realty News Report Copyright 2019
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