HOUSTON - The multifamily market in Houston has been booming with sky-high occupancy rates and rents, hordes of new people moving to the city and thousands of brand-new apartment units under construction.
But the forecast for 2015 — in light of tumbling in oil prices — is far less rosy, a panel of industry leaders said at the annual Houston Apartment Association meeting.
Rent growth will drop off and job growth will shrink as construction crews bring even more units online.
Jesse Thompson, business economist with the Federal Reserve Bank of Dallas, Houston branch, predicted that job growth in Houston will shrink by about half of that in recent years to about 50,000 to 55,000 a year.
He does not predict Houston is heading toward a recession, however.
He said while Houston is certainly affected by a dip in oil prices, the economy is much more diversified than it was in the mid-1980s during the oil bust.
Last year, 18,000 new apartment units came to the market to keep up with the demand.
This year, 27,000 are expected to come to the market, said Bruce McClenny, president of Houston-based Apartment Data Services. Last year, rent growth reached 8.1 percent and McClenny predicted that would fall to 4 percent this year.
For the top-end Class A product, McClenny said there will be concessions on the horizon, such as first-month free or other discounts.
The lower-end products may still see growth, as people priced out of the higher-end complexes move down. However, there is much less inventory in that category. There were 6,000 units torn down since 2012.
At the meeting, Orion CEO Kirk Tate said Houston has been “red-lighted” by lenders. He said developers have opportunities in lower-end Class B and C apartments to refurbish those products.
Brandt Bowden with the Hanover Company agreed that capital for new construction has dried up in Houston. He said the drop could be a positive, as things were heating up very fast in the last few years and construction costs became inflated.