If you’re looking for investment opportunities in Texas, don’t discount Houston. While the city name might prompt you to think of oil and Hurricane Harvey, there is much more to Houston than that. Real estate market research shows that now is a good time to look at the city and what it has to offer investors from a broader perspective.
As the South’s largest city and the country’s fourth-largest metropolis, Houston is home to a wide range of industries and a tremendous number of corporate offices, including the headquarters of 25 Fortune 500 companies, NASA’s Johnson Space Center, the Port of Houston and the Texas Medical Center, the world’s largest medical complex.
While the city was hit hard by the collapse of oil prices in late 2014, by mid-2017, recovery was becoming noticeable. Houston didn’t see a lot of investor activity then, but there were growth opportunities for the medium and longer terms. This was a market in transition and conditions were fluid. Then, Hurricane Harvey hit and changed everything.
Real Estate Market Recovery Coming for Houston
If you track back to mid-2014, Houston was booming. It was the center of the fastest growing region in the country and the construction industry was busy keeping up with the housing demand, especially at the high end with luxury apartments.
When the oil industry suffered a reversal later that year, Houston felt the economic effects. Demand for new housing dropped and renters became much more price sensitive as job growth turned negative. Luxury apartments continued to make their way through the pipeline, however, and by 2016, rents fell as 26,000 apartments came onto the market. Houston, which had been the fastest growing city by population in 2015, sunk to second place that year, overtaken by Phoenix.
At the beginning of 2017, a major local multifamily investment trust gave Houston’s market the grade of “D,” and the city came in last among major U.S. cities in a survey of rent growth conducted at that time. The National Apartment Association described Houston as “losing investor interest” in its Q2 2017 report.
Oil began rebounding in 2017, as shale oil production increased and the industry learned to live with its new economic reality. Hurricane Harvey was the turning point for the multifamily market, however. After the storm damaged nearly 135,000 houses and more than 100,000 apartments, the excess units on the market were absorbed quickly, and delivery of units in the pipeline slowed down. Due to the slowdown in building starts during the oil industry crisis, only 6,422 new units are expected to reach the market in 2018.
Meanwhile, Houston added jobs at a much greater pace than anticipated in 2017, for a total of 63,000, and most of those came after the hurricane. Another 45,000 jobs are expected to be created in 2018, although that number could reach 70,000. That expectation is giving a boost to both occupancy rates and property values in the city. “Apartment communities that were not inundated during the hurricane flooding last year are attracting investors who are willing to pay more for properties with a high-and-dry track record,” an executive of a local real estate valuation company recently noted.
Now is the Time to Consider Houston Multifamily Housing Investment
With a healthy apartment market emerging again, multifamily housing construction planning is picking up, too. Construction is underway on 230 new units in a mixed-use building in Houston’s Buffalo Heights district. Also, a 330-unit Class A development was announced in the suburb of Spring in January. Those units are expected to come onto the market in 2019. The Hayward, a luxury community with 246 units catering to seniors, opened on schedule in March.
Today, a seller’s market is developing for multifamily real estate acquisitions. The market has slowed since the hurricane and analysts say there is strong pent-up demand as owners hold on to their properties in expectation of rising prices. The 507-unit Woodway Square sold in February 2018, and the new owner plans to reposition the property. Luxury properties in the suburb of Katy and in Houston’s Hermann Park neighborhood have also sold since the hurricane.
The formerly troubled Houston market has turned around and now promises continued growth and high demand. This is an excellent time to invest in development or acquisition in the city as more opportunities surface.
CWS Capital Partners specializes in assisting clients with acquisitions, development, repositioning, and 1031 exchanges. It has a strong presence in Houston with over 20 properties. To learn more about investment options in the city, or to begin investing, please contact us, or view our current offerings by completing our self-certification form for accredited or qualified investors.
The information provided here is for your general informational purposes only. It should not be considered a recommendation or personalized advisory advice. CWS has made this third party information available from authors it believes are knowledgeable and reliable resources. However, its accuracy or completeness cannot be guaranteed and sentiment may change due to legal or economic conditions.
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