3  COVID-19 has been the catalyst to change consum - er preferences towards single-family homes desiring additional space and privacy. Concurrent with low inventory constraints, demand for sin - gle-family homes will fuel above average price appreciation through 2021. 4  Houston is still catching up with rebuilding dam - aged properties from hurricane Harvey, as well as rapidly adding inventory to accommodate new residents coming to the area. Builders in the Houston market are working hard to bring new inventory to the market, making Houston number one for both total SFR permits and total building permits in the last 12 months. 5  Influx of population from business relocations and people who want to move to a less expensive city. 6  President Joe Biden has proposed a $15,000 first-time homebuyer tax credit for down payment assistance. If passed, this could introduce a new wave of demand pressure and drive prices higher. 7  Homeowners have a record amount of housing equity, better loan structures, and an alphabet soup of government-backed foreclosure avoidance programs. Sellers exiting forbearance programs may be able to sell at market-rate prices instead of the negative appreciation spiral due to foreclosures seen in 2008.

SFR Price Downside Risks: 1  The November unemployment rate of 8.9 percent is among the highest vs. other major metros. This could signal a large number of distressed owners hidden by forbearance. HUD’s report on December 1 shows FHA delinquencies around 22.4 percent (47,816) with serious delinquencies at 15.5 percent (33,140) for the Houston market. 2  The lagging job recovery is in the bottom quartile vs. other major MSAs. 3  Inventory could turn into a glut over the next few months as people come out of forbearance pro - grams. The inventory would be welcome to stabilize the market but may not be enough to cause a decrease in prices. 4  Severe weather risk is a factor to prepare for, and early forecasts indicate higher than average number of storms in the gulf for the 2021 hurricane season. 5  Rising inflation could cause the FED to raise mortgage interest rates sooner than expected which would significantly reduce demand. When rates go up, prices will come back to earth.

The variability around this forecast is wide and dependent upon data available as of September 2020. The severity and duration of the COVID-19 epidemic, as well as the response of the public and policymakers, continues to change daily.

Current Rent Price

Rent vs Income

Gross Yield

Current Home Price

© 2021 Mapbox © OpenStreetMap

© 2021 Mapbox © OpenStreetMap

© Mapbox © OSM

© Mapbox © OSM

3Bd SFR Rental Price

Rent vs Income

Avg Yield

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RENTAL RATES As of December 2020, the median three-bedroom, SFR home in the Houston MSA is $1,640 a month, an increase of 7.5 percent from last year. SFR rentals in Houston have not encountered the normal seasonal down-cycle due to the lack of SFR rental inventory, eviction moratoriums, and population growth. SFR affordability is becoming an issue. The market-level rent-to-income ratio is at 31.5 percent, which is just below the national average of 32 percent for metro MSAs. Areas in

East Houston and Pasadena show concentrations in lower income areas which have R/I ratios from 40 to 50 percent. Gross rental yields for single-family properties average 9.8 percent for the metro, with many sub-market areas well above 10 percent. SFR will continue to have a demand advantage over multifamily structures as families relocate from cramped multifamily structures.

Houston MSA Rent Price Forecast through 2021: 2 percent to +4 percent

82 | think realty magazine :: march 2021

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