Aligned Ventures

WORTH KNOWING Market Trends in Houston's Multifamily Market Financial analyst Martin Zweig famously said, “The trend is your friend.” With that in mind, let’s consider a few noteworthy trends in the Houston multifamily housing market in the second half of 2024. ROBUST DEMAND REBOUND Demand in Houston's multifamily market rebounded strongly in early 2024 as absorption exceeded deliveries for the first time since Q3 2021. Over the past 12 months, approximately 16,000 units were absorbed. That’s about 3% above the pre-COVID five-year average. This positive trend continues in Q3 2024, indicating the market's resilience and potential for continued growth. (Source: Costar 07/2024) DISCIPLINED DEVELOPMENT While Houston leads the nation in new deliveries, the pace of development has remained disciplined. Currently, 2.8% of the city’s inventory is under construction, below the national average of 4.0%. This is crucial as it mitigates the risk of overbuilding, a challenge faced by other fast-growing Sun Belt markets like Austin, Charlotte, and Miami, where up to 13% of their inventory is under construction. (Source: Costar 07/2024) VACANCY AND RENT TRENDS Houston's overall vacancy rate has increased to 11.1%, the highest in 20 years, primarily due to the supply-demand mismatch. However, rents have risen since December, indicating that the worst may be behind us. Currently, annual rent growth sits at 0.3%, significantly below the market's 10-year average of 2.3%. Most new developments focus on high-end communities, increasing demand for more affordable submarkets like Alief and Greenspoint/IAH Airport, which have been top performers in the past 12 months. (Source: Costar 07/2024) LOOKING AHEAD Continued deliveries are expected to keep vacancies elevated and rent growth flat through 2024. However, a thinning pipeline due to high borrowing costs and a stricter lending environment may pave the way for improvement in 2025. Groundbreakings have significantly decreased, indicating fewer new units in the future. This should help balance supply and demand dynamics as we expect job and population growth in the city to continue to show positive growth. (Source: Costar 07/2024) Best Regards, Aligned Ventures Team