Q1 2025 Houston Multifamily Market Report
Market Overview
Moving through 2025, Houston’s multifamily market is stabilizing. The latest supply surge has slowed rent growth, which has remained below 1% for the past six quarters. Rents have decreased in high-growth areas north of Houston, such as Outlying Montgomery County and The Woodlands. Meanwhile, affordable submarkets with limited new supply, such as South Central Houston and Greenspoint/IAH Airport, have been among the top performers over the last year. On the supply side, the majority of the construction pipeline is empty. New supply for the year is forecasted to decrease substantially. Approximately 9,400 units are expected to open, which is the lowest total since 2018. High capital costs and tougher lending criteria are driving the decline in groundbreakings.
- Vacancies remain elevated, currently standing at 11.5%. A recovery in the rate is anticipated in the second half of the year with the sharp slowdown in supply and leasing attempts to catch up.
- As a result of current conditions, rent growth is set to reaccelerate. The rate could see a return to its 10-year average of 2.2% by the end of 2025.
Rent | Vacancy | Construction
Houston ranked amongst top three for new supply over the past five years.
Houston remains a relatively affordable market. The $1,380 per month average is over $400 per month lower than the national average and approximately $200 per month lower than Austin and DFW. Downtown Houston has the highest rents, at $2,300 per month. Rents in affluent suburban submarkets such as The Woodlands and Cinco Ranch are also higher, averaging $1,600 per month. Submarkets with less development activity and an abundance of lower-rated goods, such as Greenspoint/IAH Airport and Alief, boast the lowest rents at under $1,000 per month.
Currently, there are 12,000 units under construction. Over the past five years, Houston’s multifamily market has added around 100,000 units, ranking the market among the top three, behind DFW and New York, for most new supply. However, construction starts have decreased dramatically since the peak of 2022, mostly due to the pressure of high material costs and expensive debt options. With such a drastic drop in new supply hitting the market over the next few years, rents for existing complexes will benefit from the lessened competition.
By the Numbers
- Units Under Construction: 11,808
- Units Delivered in Past 12 Months: 21.7K
- Vacancy Rate: 11.6%
- Annual Rent Growth: 0.3%
- Sales Volume: $54.9M | Q1 2025 | Source: CoStar Group
Sales
Cap rates remain high relative to a few years ago, but have since stabilized. Private investors, in line with property types, are driving activity in the multifamily market. Debt assumptions remain prevalent and some deals purchased at the peak of the market are underperforming. Looking ahead, while certain transactions purchased at the market high with floating-rate loans may face difficulties, delinquency rates remain low, both regionally and nationally, and major distress is not expected in the immediate future. Long-term, buyers have a positive outlook regarding Houston’s multifamily market. Houston, the fourth most populous city in the United States, should continue to attract students, young professionals, and families to its sectors across the market, owing to its relative affordability in comparison to DFW and Austin.
