Class A Gets an F

HOUSTON – (By Dale King, Realty News Report) – It’s been a while since the cost of renting an apartment in Houston has gone up. Ditto for most other Texas metros since all have been impacted to greater or lesser extents by the coronavirus pandemic.

Bruce McClenny, president of ApartmentData.com, has mashed the data from a pretty miserable 2020 and is taking a cautiously optimistic look at the future – including the rest of this year.

“I’m predicting a rent growth of 1.5% for Houston this year,” he said during his recent report to the Houston Apartment Association. “It’s not the best of all, but it’s not negative. It’s going to take some time” to recover, and he sees better performance coming in 2022.

He also prognosticated that Houston would see a 2% increase in jobs – 60,000 in all, the delivery of 14,000 new units, absorption of 10,000 and an occupancy rate of 88.5 for the rest of this year.

Some items of note from McClenny’s presentation include:

“Through December, the Houston apartment market has continued to decline $21 or -2.0% since March. Class A gets an F by has performing the worst with a $104 or -6.7% decline since March. Class B has fared better with a lower decline of $11 or -1.1% since March. Class C fell even less — $3 or -0.4% since March while Class D has lost the least ground and now rests at $2 less or -0.3% since March. Overall, it’s been a tough year for the Houston market.”
“2020 has been the worst year for rent growth in recent history, the only negative performance in the past six years.”
“Houston’s absorption since March has been better than expected with 11,300 units versus 14, 200 in 2019 and better than the 8,700 in 2018.”

The charts he used during the presentation showed Houston rents declined $21, or -2% for the 12-month period from Jan. 1, 2020 to Dec. 31, 2020. For the period from March 31, 2020, when the pandemic truly settled in, to the last day of the year, the decrease was $12, or -1.7%.

Actually, he said, 2020 began with rents in all Texas metros taking an upward turn. But that didn’t last long.

“For the rest of the year (after March 2020), rents marched downward – in all the metros.”

“This is a worldwide problem,” he noted. He said Austin “was the hardest hit” Texas metro among the top four. Every rent class was recorded in the negative, with Class A property dropping $137 – or 8.1%.

McClenny said Austin and Orlando, Florida, were similarly slammed.

San Antonio fared best of all big cities in the Lone Star State. Overall, the cost of renting an apartment went up $6, and only Class A and Class D properties lost ground.

Dallas-Fort Worth “has also done well,” said the ApartmentData.com report. Class A property was the only category to tally a negative score, and that was only -2.4%.

McClenny also traced Houston’s rent payment levels for the past six years. The increase was $44 for 2015, the year that began a slide toward “the fracking bust.” Difficulties in the energy industries held the growth rate for 2016 to zero.

The year 2017 was kind of wacky, though it resulted in a $43 growth in the lease payment for an apartment. “In 2017, we had the Super Bowl (Tom Brady Leads Epic Comeback Over Falcons in OT), the World Series and Hurricane Harvey.” He said that $28 of the $43 increase in 2017 was caused by the storm, which heavily damaged thousands of homes.

Houston’s hike in rent for 2018 was $12; for 2019, $27. Then, the floor caved in.

Comparing financial conditions now to the Great Recession just over a decade ago, he said, “The figures were a little stronger then, in dollars and percentages.”

Of the 42 Houston submarkets, McClenny said, rents in the bottom 12 dropped 5.8%. The middle 12 submarkets remained about one nostril above water at +.3%.

The top 12 submarkets came in with more respectable numbers. McClenny said the “best” area was Richmond/Rosenberg with 5.6% growth. Other top performers included FM 1960 East/IAH Airport, 4.6%; Northline, 3.6% and Inwood/ Highway 249, up 3.5%.

File: Class A Gets an F in Houston apartment market rents

File: (2) Houston. Multifamily. Class A Gets an F in Houston apartment market rents. Bruce McClenny, president of ApartmentData.com.