experienced only a five percent decrease from 2008 highs and recovered the losses by 2012. The 10-year overall home price appreciation is a strong 52 percent. Investors should note that Texas has some of the highest property taxes in the nation. Harris County is currently over two percent, versus the national average of 1.08 percent. This should be factored into your expense calculations when evaluating property cashflow potential. RENTAL RATES As of January 2020, the average three-bedroom, single-family rental home in the Greater Houston MSA is $1,545/mo. Dallas rents in the same class are $110 more at $1,655/mo. The metro area one-year change for a three-bedroom detached SFR is up only 1 percent, a $15 annual increase, although January is typically a slow month. In comparison, Dallas-Ft Worth is up 5.5 percent and Austin is up 3.4 percent for the last year. Over five years, SFR rentals in Houston have increased nearly 12 percent, Dallas has increased 26 percent and Austin over 17 percent. The softness in the Houston SFR rental market can be attributed to affordable home values and low interest rates, turning a portion of renters into buyers. Overall the Greater Houston market is fairly uniform for such a large area, with three-bedroom SFR rents ranging between $1,400-$1,700. The Woodlands, League City and Galveston are higher than average
SATURATION, VACANCY&YIELDS The Greater Houston MSA rental saturation for single- family properties (renter-occupied properties versus total) comes in at a relatively low 16.89 percent. Dallas and Austin are higher at 17.8 percent and 18 percent respectively. This indicates only a small portion of SFR housing is provided for renters, so there is still plenty of room for investors. However, demand is soft for SFR homes with a higher than average 9.5 percent vacancy rate and a higher than average SFR rental listing duration of 33 days. This metric also points to renters becoming buyers due to the low interest rates and nationally low home prices. Gross rental yields (excluding expenses) for three- bedroom SFR properties in the Greater Houston MSA is at 9.8 percent, solidly above the national average of at 8.2 percent. Northeast Houston, Galena Park, Pasadena and Southeast Houston have great yield potential between 12-14 percent. CONCLUSIONS Houston is a rapidly growing metropolitan area, especially for its scale. It has proven its resilience to economic downturns and provides steady appreciation for a long-term buy-and-hold real estate investment strategy. The local economy will continue to expand, especially as businesses continue to move into the area.
ranging from $1,800-$2,000. Central Houston, including Uptown, Bellaire and west along the I-10 through the Energy Corridor out to Katy, command the highest rental prices in the metro from $1,900-$2,600. The overall rent-to-income ratio of the Greater Houston MSA comes in at 28.3 percent, a few points lower than the national average of over 32 percent. However, areas near downtown within the I-610 loop can have elevated rent to income ratios between 40 percent-60 percent. The Houston market has relatively low five-year rental increases of only 10-20 percent. That, combined with a rapidly growing, well-paying job market, is a positive signal to investors that rental prices have plenty of room to appreciate further while maintaining affordability.
HOUSTON RENTAL PRICE BY ZIPCODE
3BD AVG PRICE 1,400 2,000
88 | think realty magazine :: may 2020
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