Note: Our market forecast includes Houston data and data from its surroundings, including The Woodlands, Sugar Land, and more.
Why consider Houston for real estate investing?
Houston -- often referred to as “Space City” -- might be best known as the home to NASA, but this sprawling metro has much more to offer than just astronauts and space missions, especially if you’re in the real estate game.
With more than 2 million residents, the Houston area has one of the biggest housing markets in the country. The metro encompasses a whopping 637 square miles of land, spans nine different counties, and includes over 100 different unique cities, towns, villages, and incorporated areas -- some with more than 1 million residents in their own right.
In addition to its well-known aerospace industry, the Houston metro also has strong roots in healthcare and the oil and gas sector and is home to numerous highly ranked colleges and universities.
Are you considering investing in Houston real estate? Here’s what you need to know.
The state of the market
Houston’s housing market is slowly but steadily recovering from the pandemic, but concerns still remain -- particularly around unemployment and the financial impact it’s having on local residents.
Largely, though, there’s reason for optimism, and according to our research, Houston is both healthy and improving on many major indicators. Housing Tides shows an outlook slightly more positive than the U.S. average.
Here are the three major trends we’re seeing in Houston right now:
- The rental market is holding strong.
- Housing supply is growing.
- Oil and gas employment is down — and its impact is felt widely.
1. The rental market is holding strong. There’s a lot to feel positive about if you’re a rental investor in Houston. Despite renters getting hit hard with pandemic-spurred job losses, Houston rental vacancies are at their lowest point in years. Even better? Rents are steady. The median rent sits at $1,464 -- up about $100 over the last five years.
2. Housing supply is growing. Houston has a housing supply problem just like the rest of the country, but it appears to be recovering better than most, at least in the last few months. The city currently has a 2.5-month supply of houses, a notable jump over national averages. More importantly, permits are up in the area, too — namely single-family homes. Houston saw almost 4,300 single-family permits issued in just February alone.
3. Oil and gas employment is the wild card. Houston’s unemployment rate tracks higher than the national average, and it’s likely due to its heavy focus on oil and gas -- an industry hit particularly hard by the pandemic. Though jobs have recovered slightly since last year, the sector still has a bumpy road ahead, especially with a more environmentally-concerned administration in the White House.
Fortunately, the city has a number of other industries in its corner, including healthcare, aviation, and technology. These should see growth as we get further away from the pandemic.
Houston housing demand indicators
Charts courtesy of Housing Tides, an EnergyLogic company.
Demand in Houston should strengthen in the coming months. The area has gained 77,000 new households in the last year, consumer sentiment is improving, and key demand indicators show a fairly affordable market compared to national averages.
Like many cities, Houston’s job market took a major hit during the pandemic. The oil and gas industry was hit particularly hard as work-from-home became the norm (no more morning commutes!) and travel basically stopped altogether. At one point last year, the city had lost over 300,000 jobs, and according to reports, oil and gas accounted for a whopping 100,000-plus of those.
Fortunately, the market has somewhat recovered since then, and jobs are only down by 141,300 over the year.
Unemployment rates have seen a similar up and down. The local unemployment rate peaked at 14.3% last April but had since dwindled to 8% by February. That’s above the national average of 6.7% and is likely due to lingering job losses in the oil and gas field.