HOUSTON – (By Dale King, Realty News Report) – The rental market in Houston appears ready to wrap up 2021 by notching a new record – or something close to it — for rental price growth, says Bruce McClenny, president of the marketing research firm, ApartmentData.com.
The organization’s Market Line report for December says that “during the past 12 months,” the Space City has experienced a 15.8 percent hike in the cost of renting apartment units. That’s a figure McClenny said “dwarfs any other rent growth” during a one-year period.
McClenny, a 26-year contributor to ApartmentData.com, can show lease figures going back to the 1980s to prove his point.
Renters searching for residences have encountered good times and bad. He noted that 2006, the year after Hurricane Katrina hit, was a bad year with lots of “moving in and out.” He recalled 2014 as a year with “the best rent growth [prior to 2021]” due to the fracking boom. That was followed by the fracking “bust” that dropped rental numbers in 2016.
Ironically, while the rent growth hike this year is impressive for Houston, it still falls short of lease market progress in at least three other Texas metros, according to McClenny. His report for the final month of 2021 says rental price increases in Dallas/Fort Worth rang in at 21.2 percent. In San Antonio, a city much like Houston, McClenny said, rate growth for rental property jumped 17.9 percent.
In Austin, which has been a hotbed of property transactions for lessees, home buyers and the industrial market in the months since the pandemic began to lessen its grip, rental rate growth is 30.5 percent.
McClenny said folks are flocking to Houston for jobs. “All other Texas markets have had more dynamic job growth,” he told Realty News Report. “Houston has not gained back all the jobs that were lost during the pandemic.”
He said the city opened 2021 with a workforce of about 3,099,00. “If you go back to February of 2020, just before the economic lockdown, the workforce totaled 3,192,000. We still have to recover about 92,000 jobs. That’s significant.”
A total of 206,600 jobs “were lost in 2020 because of the pandemic,” said McClenny. “We have never had a year that bad.”
The nation’s unemployment rate reached 4.8 percent in September 2021, down from 7.8% in September 2020, according to the U.S. Bureau of Labor Statistics. “This drop has fueled a demand for apartments, which is part of what has driven the rental rate increase in 2021,” said McClenny.
A chart contained in the ApartmentData.com report for December provides visual evidence of the rent price situation and occupancy rates for 2020 and 2021.
The average price of an apartment in Houston last year hovered around the $1,050 mark through much of 2020. Flash forward to January of 2021 and the chart depicts the start of a major upward curve in rental prices that continued through the year, topping out at about $1,180, settling back to $1,179 by year’s end.
McClenny’s report also said nearly 37,000 apartment units were absorbed in 2021, an amount considered to be a lot of leasing activity.
“For every five to six jobs created, one unit of absorption is recorded,” he said. “Absorption is a measure of demand. When absorption goes up, it drives occupancy.”
Houston’s occupancy level for 2021 is listed in the report as 91.7 percent. The report lists the following results in other Texas metros:
- Dallas/Fort Worth: Occupancy, 93.5 percent; rental price, $1,379 for an 879 SF unit; 21.2 percent rental rate growth in the past 12 months, 44,944 units absorbed. McClenny called D/FW “a Mecca for people moving from California.”
- San Antonio: Occupancy, 93.5 percent; rental price, $1,137 for an 856 SF unit; 17.9 percent rental rate growth over 12 months; 11,562 units absorbed.
- Austin: Occupancy, 92.5 percent; rental price $1,554 for an 875 SF unit; 30.5 percent rental rate growth in past 12 months; 22,896 units absorbed.
McClenny also listed the hottest submarkets in the Houston area during the past three months:
- Lake Houston/Kingwood, which he said showed “the best real growth and absorption,” annualized growth of 19.5 percent.
- Tomball/Spring, annualized growth of 12.8 percent.
- Dickinson/Galveston, annualized growth of 11.8 percent.
- Katy/Cinco Ranch/Waterside, annualized growth of 9.7 percent.
- Westchase, annualized growth of 10.3 percent.
McClenny noted that all the hottest submarkets are suburban areas.
Dec. 11, 2021 Realty News Report Copyright 2021
For more about Texas real estate, check out the book Houston 2020: America’s Boom Town – An Extreme Close Up by Ralph Bivins. Available on Amazon http://tiny.cc/4a2g6y
Houston 2020 Ebook version https://tinyurl.com/4xm7z8b5
File: Rents Soared 16 percent