While Houston's multifamily market is coming off a relatively strong year, some key fundamentals took a step back in the final three months, according to Collier's latest report analyzing the performance of the sector and the city.
In the fourth quarter, 3,585 units were absorbed. That's up from the 3,048 from 12 months ago, but down from the 4,814 in the third quarter. The increase in demand for 2024 as a whole was driven by Class A properties, where absorption levels surged 25 percent from 2023. Colliers attributed the fourth quarter absorption decline to "weak seasonal demand."
It was a similar story for rent prices, which dropped to $1,274 from $1,285 in the third quarter but rose 0.7 percent year-over-year. When it comes to average prices per multifamily unit, Houston's 2.8 percent growth outpaced Texas' one percent decline in the fourth quarter.
Occupancy was a category that was up in the fourth quarter compared with the other two periods, at 88.6 percent. That compares to 88.5 percent from 12 months ago and 88.4 percent in the third quarter.
Cap rates slipped 10 basis points to 5.7 percent. That's slightly higher than both Texas' and the national average of 5.6 percent.
New supply continued to go down and was only recorded 2,066 units in the final three months of 2024. A year ago, 6,097 new units were delivered.
"Construction activity has decreased by over 50% during the year while occupancy levels for multifamily projects remained comparable or better than the previous year, allowing tenants to absorb the heavy supply of new product brought to the market over the past 48 months," Colliers wrote.
Meanwhile, rolling investment sales volume at $3.3 billion slipped to 5.3 percent on an adjusted basis year-over-year and also experienced a drop quarter-on-quarter.