Houston Is on a Steady Growth Trajectory After Years of Lackluster Metrics, Calling for Revived Buyer Interest

Apartment fundamentals in Houston have turned the corner after a decade-plus span of high availability and modest rent growth. The market posted its strongest absorption total in at least 20 years in 2021, producing the tightest vacancy rate and fastest annual rent gain over that same time frame, according to the latest Houston Multifamily Investment Forecast from Marcus & Millichap.

The report indicates that multifamily metrics will again improve this year, with vacancy expected to settle in the upper-4 percent range by year-end, compared with an average rate above 7 percent from 2010 through 2020. Momentum on the leasing side is largely driven by robust household formation, which is a product of both in-migration and population composition.

Houston is expected to record the third largest influx of new residents among major U.S. metros this year. Adding to this, the 20-to 34-year-old population is anticipated to grow by the second highest amount in 2022. As this is a key demographic for the rental segment, the outlook is favorable for apartments. Diverse landscape, comparatively higher yields drive activity.

The turnaround in apartment metrics and promising outlook are garnering attention, especially with the average first-year return in Houston sitting roughly 40 basis points above nearby Dallas-Fort Worth.