Houston Investment Property Market

Houston Investment Property Market Overview

The Metropolitan Statistical Area (MSA) of Houston–The Woodlands–Sugar Land is currently the fifth most populous MSA in the U.S., and predicted1 to climb above 7 million in 2018. Houston alone is the most populous city in the state of Texas, forecasted2 to surpass Chicago as the country's third most populous by 2030.

In an outlook ranking3 by international business consulting firm AT Kearney, Houston is classified as a global city (a significant hub in the global economic system) and a world leader in GDP per capita. The area is experiencing modest economic expansion4 following the oil and gas downturn, fueled by rapid diversification5 from its strong energy base. This entrepreneurial-friendly city is also climbing national rankings on the Kauffman Index6 as a startup hub.

Population Growth & Strong Gross Yields

The Greater Houston Metro Area offers modest average entry points ($183K)11 for starter homes in a region with rapid suburb growth12 and above-average forecasted household growth of 2.475%13. Houston is expected to maintain its current 11% average gross rental yields through 2020, compared to an expected 8.4% average across 63 major U.S. single-family rental markets.14

Looking at the economic landscape, more than 29,000 new jobs15 are forecasted for 2017, with growth16 in a number of non-energy and consumer-driven sectors offsetting losses in sectors closely tied to energy. In 2018, the region is expected to return to a long-term trend17 of adding 60,000 jobs each year. Current and forecasted average job growth rates, of 1.4% and 1.075% respectively, are on par with national averages.18

Name-brand companies are also bringing more jobs to Houston. Amazon is hiring 2,500 employees to staff its distribution center19 in Summer 2017, and FedEx is opening a new 800,000-square-foot distribution center20 in September 2017 that will eventually employ 2,200 people. Currently, two dozen Fortune 500 companies are headquartered in Houston.

Additionally, Houston is ranked7 as one of the youngest8, most racially and ethnically diverse9 areas in America, and considered a great place to raise a family. The Bayou City, as it has been nicknamed, is currently No. 20 out of 100 on the U.S. News & World Report's Best Places to Live 2017 rankings10, with an overall score of 7/10.

Overall, we believe population growth, strong expected gross yields, an expanding business economy, and modest average entry points make Houston an up-and-coming market for single-family rental investors.
  • Strong 11% average gross rental yields compared to an 8.4% average across 63 major U.S. single-family rental markets21
  • Modest average price points ($183K)22 for entry-level single-family rental homes
  • Forecasted household growth (2.475%) higher than the national average (1.4%)23
  • Below-average negative equity rate (8.50%) compared to the national average (10.40%)24, indicating less potential for local foreclosures
  • Houston is climbing national rankings on the Kauffman Index as a startup hub
  • Occupancy rate is 91.6%, which is below the national average (95%)25
  • Effective property tax rates (2+%) for single-family rentals in the Houston–The Woodlands–Sugar Land MSA are in the top 10%26 of all MSAs nationwide.
  • Home price appreciation is expected to average around 3% in the next four years, which is below the 3.7% forecasted national average.27
  • Houston is called the Bayou City because it is home to 10 winding waterways that flow through the surrounding area.
  • Spread across a 17-block area, Houston’s Theater District ranks second only to New York in terms of seat concentration in one geographic area.28

Real Estate Investment Insights

Investment Style: Balanced
While each property will differ, this market is likely to have properties that provide a blend of yield and appreciation.
Inventory:
Home Value *
$182,100
$201,900
National Avg
Home Value Growth (YoY)
4.8%
6.9%
National Avg
Rent **
$1,532
$1,430
National Avg
Source: Financial data from Zillow includes single family, condo & cooperative homes, updated on 08/31/2017
Job Growth (YoY)
1.8%
1.5%
National Avg
Household Growth (YoY)
2.4%
1.0%
National Avg
Estimated Months of Resale Supply
3.9%
4.2%
National Avg
Household Income
$60,800
$59,727
National Avg
Supply, Demand & Affordability data includes single family homes only, updated on 10/11/2017
  • Arrows indicate the directional change since the last update. No arrow indicates that there was no change in the data or no previous data is available.
  • * Home Value: includes all types of housing, including primary resident, condos, investment properties, etc.
  • ** Rent: includes all rental properties, including Single-Family Homes, multi family units, etc.