Houston Apartment Investors Chill While Rents Rise

HOUSTON – (By Dale King, Realty News Report) – The once-booming multifamily investment sales market in Houston are showing visible signs of slowing down, says a report from Colliers detailing activity for the first quarter of 2022.

Absorption

Demand for multifamily housing slowed between quarters, says the firm’s analysis. The net number of units absorbed during the first quarter of 2022 fell to just 1,708, compared to 4,098 during the fourth quarter of 2021 and 4,951 units leased during the first quarter of 2021.

Occupancy

Not all was bleak on the Houston front during the past 15 months. Apartment occupancy remained steady at 91.5 percent, a figure reached late last year, and which continued solidly through the start of 2022. The first quarter of 2021 saw the occupancy level at 88.8 percent.

The Colliers report, using information from Apartmentdata.com, shows that occupancy began nudging upward during the opening quarter of 2019 and remained largely unchanged until the second quarter of 2021 when it started to rise noticeably. Hikes in the number of occupied rental units continued to move upward during Q3 and Q4 of 2021 and reached its current high-water mark in the period of January to March 2022.

The average monthly rent for multifamily units increased 2 percent over the quarter, from $1,188 per month in Q4 2021 to $1,212 per month in Q1 2022. The breakout of rent prices reported by Colliers was: $1,710 for Class A units, $1,221 for Class B, $913 for Class C and $730 for Class D.

Investments – Houston Apartment Investors Chill in 1Q

Perhaps the most telling change came in Houston’s multifamily investment market. After reaching a historical high in Q4 of 2021, the sum spent in  Space City  for multifamily dropped precipitously during the first three months of 2022, sliding from $8.6 billion to $1.2 billion. Further, the report points out, sales volume decreased 17 percent year-over-year in Houston between Q1 2021 and Q1 2022, according to Colliers’ data provider, Real Capital Analytics.

Actually, the investment market in Houston didn’t perform all that badly compared to Texas as a whole. Colliers says the median sales price per unit in Houston decreased by 5 percent during the just-completed quarter of the year. At the same time, “Texas recorded the largest quarterly decrease (price per unit) in this category,” which declined 22.5 percent, dropping from about $156,000 to around $128,000, Colliers’ reported.

The price drop in Houston and Texas overall was particularly noticeable since it came after a lengthy period of either stability or rising rental charges.

During the first three months of this year, the median price per unit on the national level fell just .4 percent, from $191,406 in the fourth quarter of 2021 to $190,614.

Construction & Supply

More than 13,000 units are under construction and another 32,800 units are proposed.  The report says a total of 709,655 rental units are available: 192,013 in Class A, 236,888 in Class B, 204,668 in Class C and 76,086 Class D apartments.

Colliers offered a positive conclusion in its report, forecasting that demand, occupancy, units under construction and average monthly rents for Class A units are all slated to increase.


May 5, 2022 – Realty News Report Copyright 2022

Image: Colliers

File: Houston Apartment Investors Chill

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File: Colliers. Teresa Lowery. Todd Stewart. Chip Nash, Bob Heard.Jim Humphries. Jaleel Adatia. Houston Apartment Investors Chill in 1Q22.

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