More than 17,000 multifamily units are under construction across the Houston metropolitan area, which ranks seventh in the country for supply underway. Once completed, however, the new stock will expand the market’s inventory by only about 2.7%, which is minimal compared to other cities whose percentage of new stock is in the double digits, such as Nashville, Tennessee; Fort Myers, Florida; and Santa Fe, New Mexico.
What could this mean for Houston? With a shrinking supply, but increased demand as more people continue to move to Houston & Texas in general, we expect there to be heightened demand for multifamily housing in the region.
The shortage of supply coupled with the increase in material and labor cost to build leads us to believe that all roads point to higher prices down the road. There may likely be a step up in basis as new inventory comes online in the coming years. This will help existing product that was build at a lower cost basis to drive up rents and in turn, drive up values as well.
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