Houston’s multifamily market showed mixed performance in Q3 2025 as vacancy remained elevated at 11.6%, unchanged from the prior quarter but up year-over-year, marking a 20-year high. Strong demand supported 3,100 units absorbed, yet new supply, with 4,800 units delivered and 9,000 under construction, continued to outpace leasing. Rent pressure persisted, with asking rents averaging $1,400 per unit and rent growth down 0.6%, following a negative turn in Q2 for the first time since 2010. Suburban submarkets drove most absorption, but oversupply kept concessions widespread. Despite near-record absorption earlier in the year, rent softness and elevated vacancies are expected to continue until supply moderates and demand fully catches up.

 

Key Findings

• Conditions are improving as vacancy holds at 11.6%, however rent growth remains negative at -0.6% and asking rents average $1,400, with heavy concessions needed to maintain occupancy around 93%
• For the first time in four years, absorption outpaced new deliveries in the first half of 2025, driving a 50-basis-point drop in the overall vacancy rate.
• Investors remain active with $57.5M in sales, $150K per unit pricing, and cap rates rising to 6.5%, reflecting cautious optimism as fundamentals slowly strengthen.

 

Houston Multifamily Supply & Demand Dynamics

Source: CoStar Group, Inc.

 

Houston Demographics

Source: CoStar Group, Inc.

• Unemployment Rate: 4.4%
• Current Population: 7,883,927
• Households: 2,887,007
• Median Household Income: $81,844

 

Houston’s economy is among the nation’s strongest, with over 300,000 more jobs than before the pandemic, though growth is slowing after several years of record gains. The metro area, now the fifth largest in the U.S. with 7.9 million people, continues to attract residents thanks to its affordability, business-friendly climate, and cultural diversity. While oil remains vital, Houston is rapidly diversifying into healthcare, biomedical research, and aerospace. The Texas Medical Center’s TMC3 project alone is expected to create 26,000 jobs and $5.2 billion in economic impact. With strong population growth, a median income above the national average, and a key role as a gateway to Latin America, Houston’s outlook remains robust and diversified.

 

Houston’s Largest Companies by Revenue

Over $50 Billion | Source: Greater Houston Partnership

• ConocoPhillips
• Phillips 66
• Sysco
• Exxon Mobil

 

Population, Labor Force, & Income Growth

Source: CoStar Group, Inc.

 

Houston Multifamily Construction

Construction activity slowed notably in Q3 2025, signaling a shift toward a more balanced supply environment. About 9,000 units were under construction, the lowest level since 2011, as elevated capital costs, tighter lending, and material cost uncertainty curbed new starts. Deliveries continued to moderate, with 4,800 units completed and 3,100 units absorbed, while groundbreaking activity in the first half of the year suggested a potential 15-year low for annual starts. Development remains concentrated in luxury mid- and high-rises in the urban core and suburban projects in fast-growing areas like Bear Creek and Northwest Houston. The pullback in construction is expected to ease pressure on the 11.6% vacancy rate and support rent stabilization in 2026.

 

Units Construction Starts

Source: CoStar Group, Inc.

 

Units Under Construction

Source: CoStar Group, Inc.

 

Houston Multifamily Sales

Investment activity in Houston’s multifamily market remained steady in Q3 2025, with total sales volume reaching $57.5 million and properties trading at an average of $150,000 per unit. Investor sentiment continues to improve following a cyclical low in early 2023, with a higher number of transactions recorded in the first half of 2025 than any comparable period since 2022. Cap rates have adjusted upward to around 6.5%, reflecting a higher-return environment amid elevated 11.6% vacancy and -0.6% rent growth. Buyers are prioritizing stable, income-producing core and core-plus assets, particularly among Class A properties, which has accounted for a rising share of trades. As new supply slows and fundamentals stabilize, investor confidence is expected to strengthen further.

 

Houston Multifamily Sales Volume

Source: CoStar Group, Inc.

 

By the Numbers

Q3 2025 | Source: CoStar Group, Inc.

• Sales Volume: $57.5M
• Price Per Unit: $150K
• Cap Rate: 6.5%
• Vacancy Rate: 11.6%
• Rent Growth: (0.6%)
• Asking Rent Per Unit: $1.4K
• Under Construction: 9K Units
• Delivered: 4.8K Units
• Absorbed: 3.1K Units