Houston: Older MF Strengthening

Older multifamily properties in Houston could experience price gains this year, even as the city’s upper-end apartment market keeps delivering more units, according to Deal Sikes & Associates, a Texas-based valuation firm.

Matthew Deal, principal of the company, said that Class B and Class C properties are enjoying high rates of occupancy and increasing rents, which are building the underlying investment values. Furthermore, “While Houston’s Class A apartment market is oversupplied, the inventory of affordable Class B and C units is tight,” Deal said.

Meanwhile, Class A apartments are headed for what Deal called a “rough patch.” New supply will lead to apartment owners cutting rental rates. As a result, “we expect to see valuations for upscale apartments . . . to be under pressure until the market reaches equilibrium again in two or three years,” Deal said.