“Radical,” “amazing” and “wild” are some terms Bruce McClenny, president of Houston-based Apartment Data Services, uses to describe the multifamily market in 2021.
McClenny last week gave a presentation for the Houston Apartment Association’s State of the Industry, reviewing 2021 and outlining a forecast of 2022.
From 2020 to 2021, average rent for all apartment types rose 13.9%, or $145, to $1,188 per month, unit absorption rose from 11,909 to 37,547, and occupancy climbed to 91.4% from 88.4%.
For Class A apartments, the average rent growth was even more pronounced, rising by $253, or 17.8%, to $1,675 a month.
“What we’re seeing now is (market conditions) like we’ve never seen them before in terms of demand, which is expressed with absorption,” McClenny told the Houston Business Journal. “And then with that demand, it lifts the rent levels like never before.”
The Medical Center/Brays Bayou submarket saw the largest rent increase at 24.1%, followed by Katy/Cinco Ranch/Waterside at 23.7% and downtown at 23.2%.
It’s important to keep in mind that if 2021 was radical in terms of positive growth, 2020 was the opposite. The Houston area ended 2020 down more than 200,000 jobs, according to U.S. Bureau of Labor Statistics data. Last year, it regained more than 150,000.
That difference was felt in the apartment market.
In 2020, average rent fell by 0.8%. Still, compared to 2019, rents are up by much more than the average annual growth, which is around 2.5%. In December 2019, the average Houston area rent was $1,051.
Meanwhile, the Houston area and the rest of Texas have seen strong population growth, with many people moving here from California or New York, in part because of high housing cost in those states.
“And so a lot of people especially coming from California said, ‘Well, I don’t mind high prices. These prices seem low compared to where I’m from, and I don’t mind paying higher,’” McClenny said. “But what they did was just drive rents up for everybody else.”
For this year, McClenny forecasts 5% rent growth for Greater Houston, much lower than last year, but still elevated. While this benefits landlords, renters continue to be disadvantaged.
“Affordability has definitely left the building,” he said. “You remember those stories back in 2020 of two months free, three months free (rent) on brand new (apartments). Well, that went away, and those people that saw that are going, ‘Whoa, I can’t afford it now. I’ve got to find another place down the ladder.’”
Others might move back in with their parents or other people, or they might move farther outside the city, where rents overall are still lower, McClenny said.
Publication: Houston Business Journal