Multiple offers, massive bidding wars, and inventory at 25-year lows are three of the best ways to describe the state of the Houston real estate market today.
While a hot real estate market like Houston can be frustrating for homeowners, it can be ideal for single-family rental property investors. That’s because the strong job market in Houston is attracting more people, and when the housing market is tight they rent instead.
With all the buzz surrounding Texas real estate markets like Dallas and San Antonio, you might overlook Houston. If so, you might want to look again: The “Bayou City” offers real estate investors outstanding value and accessibility to a major U.S. housing market.
For young professionals and families, moving to Houston is a no-brainer. The area’s low cost of living, job growth, affordability and amenities present limited barriers to entry and provide a place to call home for the long haul.
We did a little research into why the Houston market is performing so well and where it might be headed. Here’s what we found.
Houston had the third largest population growth in the country between 2018 and 2019, adding more new residents than Miami, Atlanta, and Charlotte. Year after year, people keep moving to Houston, with the population growing another 1.5% last year alone.
Key Population Stats:
- Houston is home to over 2.3 million people in the city and more than 7 million residents in the metropolitan area.
- Population of Houston grew by 1.52% year-over-year.
- Major counties in Houston include Harris, Ford, and Montgomery counties.
- Between 2018 and 2019 the population of Houston increased by 89,994 residents.
- Population of Houston is expected to surge this decade, adding more than 1.2 million new residents through 2029.
- Median age in Houston is 34.9 years with 43% of the population between the ages of 20 and 49.
- Per capita income in Houston is $35,190 and median household income is $69,193.
Employment in some job sectors in Houston is higher now than prior to the pandemic. As the Greater Houston Partnership reports, the finance and insurance sectors, record homes sales, and the surge in mortgage refinancing are all helping to drive job growth in Houston.
Key Employment Stats:
- GDP of the Houston-The Woodlands-Sugar Land, TX MSA is over $472.1 billion, according to the Federal Reserve Bank of St. Louis, and has grown by nearly 30% over the last 10 years.
- Employment growth in Houston is 3.1% year-over-year with the metro area home to nearly 3.4 million employees.
- Median household incomes in Houston grew by 2.5% year-over-year while median property values increased by 6.1% over the past 12 months.
- Unemployment rate in Houston is currently 7.7% (as of Oct. 2020) with the trade and transportation, financial activities, and professional and business services sectors showing the fastest signs of new growth (BLS).
- Target industries in Houston include aerospace and aviation, advanced manufacturing, energy, life sciences and biotechnology, headquarters, and transportation and logistics.
- Largest employers in Houston include Memorial Hermann Health Systems, University of Texas MD Anderson, United Airlines, The Methodist Hospital System, and Exxon Mobil Corporation.
- Houston ranks #4 among U.S. metro areas in Fortune 500 headquarters with a pro-growth government, low costs and regulations, and no corporate or personal income tax at the state level.
- Houston is home to dozens of universities and colleges including Texas A&M University-College Station, University of Houston, Sam Houston State University, and the Lone Star College System.
- 85% of the residents of Houston are high school graduates or higher, while over 33% hold a bachelor’s degree or advanced degree.
- Transportation infrastructure in Houston includes three major interstate highways, freight rail service, METRORail light-rail system, two major airports, and the Port of Houston.
- George Bush Intercontinental Airport (IAH) is the 15th busiest airport in the U.S.
Real Estate Market
In one month alone, nearly 8,000 single-family homes in Houston changed hands as buyers continue to snatch up houses at a record pace. According to Houstonian Magazine, the housing supply in Houston is at the low end, especially for moderately priced homes. As home prices in Houston keep rising, more people are turning to renting a home instead of buying one.
Key Market Stats:
- Zillow Home Value Index (ZHVI) for Houston is $201,276 through November 2020.
- Home values in Houston increased by 6.3% last year and are projected to grow by another 9.9% during the next 12 months.
- Over the last five years home values in Houston increased by more than 26%.
- Median sales price of a single-family home in Houston is $270,000 according to the Greater Houston Partnership.
- Median single-family home prices in Houston have increased by 12% year-over-year.
- 7,990 single-family homes sold in Houston in one month alone (Nov. 2020), an increase of over 25% compared to the same month last year.
- Year-to-date sales of single-family homes in Houston are up 9% compared to the same time last year.
- Days on market that it takes the average home in Houston to sell decreased to 46 days.
- Inventory of homes for sale in Houston is only 2.2 months, the lowest level in 25 years.
- Of the 82 neighborhoods in Houston, University Place is the most expensive with a median listing price of $895,000, based on the most recent report from Realtor.com.
- Most affordable neighborhood in Houston to buy a home is Acres Home, where the median listing price is $149,700.
Attractive Renters' Market
Massive bidding wars with multiple offers on homes that hit the market are becoming the norm in the Houston real estate market. According to the Houston Chronicle, the robust sales activity in the Houston housing market combined with fewer homes for sale is driving single-family home prices higher.
When people can’t afford to buy they rent instead, which is why the rental market in Houston is so strong. In fact, in the Houston metropolitan area, 52% of the households are occupied by renters.
Key Market Stats:
- Median rent in Houston is $1,650 per month for a 3-bedroom home, based on the most recent research from Zumper (Jan. 2021).
- Rents in Houston have increased by 8% year-over-year.
- Over the past three years average rents in Houston have grown by 6.6%
- Renter-occupied households in Houston account for 52% of the total occupied housing units in the metropolitan area.
- Millennials and Generation Z make up 43% of the population in Houston.
- Most affordable neighborhoods in Houston for renters include El Dorado-Oates Prairie, Langwood, and Trinity-Houston Gardens where rents are less than $1,000 per month.
- Most expensive neighborhoods in Houston for renters include Greenway-Upper Kirby, University Place, and The Museum District where rents can go as high as $4,000 per
Historic Price Changes & Housing Affordability
Two ways that real estate investors can forecast the potential demand for rental property in Houston are by reviewing the historic price changes and the affordability of housing in the metropolitan area.
Each month Freddie Mac publishes a house price index report (FMHPI) that updates the short- and long-term trends of home prices in all major markets in the U.S.
The most recent FMHPI from Freddie for the Houston-The Woodlands-Sugar Land, TX MSA reveals:
- November 2015 HPI: 179.77
- November 2020 HPI: 215.88
- 5-year change in house prices: 20.0%
- One-year change in house prices: 5.7%
- Monthly change in home prices: 0.3%
Experienced real estate investors in Houston also research housing affordability to help forecast the current and future demand for rental real estate. Affordability compares the amount of annual income needed to purchase a median-priced home in Houston.
Business forecast and personal finance publication Kiplinger publishes a housing affordability report for the top 100 metropolitan areas in the U.S. The firm ranks affordability on a scale of 1 to 10, with 1 representing the most affordable markets and 10 the least affordable.
Kiplinger’s analysis of housing affordability in Houston reports:
- Since the last real estate cycle market peak in May 2006, home prices in Houston have increased by 43.9%.
- Since the last real estate cycle market bottom in March 2012, home prices in Houston have increased by 82.2%.
- Houston has an affordability index of 4 out of 10, meaning that housing affordability in the market is mid-range and helps to explain the high percentage of people renting in Houston.
Quality of Life
Houston keeps luring more residents and business from around the globe with its mix of cultural activities, diverse communities, and low cost of living. Affordable housing prices combined with not having a city or state income tax helps keep the population growing and the city vibrant due in large part to the young people moving to Houston every year.
Key Quality of Life Stats:
- Cost of living in Houston is less than other cities in Texas including Dallas and Austin, according to NerdWallet’s cost of living calculator.
- Forbes ranks Houston as one of the best places for business and careers in the U.S.
- Houston receives an overall “A” grade from Niche.com with high ratings for family living, diversity, public schools, housing, and nightlife.
- Niche also ranks Houston as one of the most diverse cities in America, a city with one of the lowest costs of living, and one of the best places to live in the U.S.
- U.S. News & World Report agrees, ranking Houston among the 30 best cities to live and to retire.
- Some of the best neighborhoods to live in the Houston area include Cinco Ranch, Sugar Land, and The Woodlands.
- The Houston Museum District is home to 19 museums and galleries and attracts over seven million visitors each year.
- Sports fans in Houston have plenty to cheer about with the NFL Houston Texans, MLB Houston Astros, and the NBA Houston Rockets.
Get Out the Map
Where to begin your search? Roofstock created a heatmap that color-codes the city based on our Neighborhood Rating, a dynamic algorithm that enables you to make informed investment decisions by measuring school district quality, home values, employment rates, income levels and other vital investment criteria.
DARK GREEN: 4-5 star neighborhood
LIGHT GREEN: 3.5-4 star neighborhood
YELLOW: 2.5-3 star neighborhood
ORANGE: 2 star neighborhood
RED: 1 star neighborhood
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