Co-star estimates that some 72,000 apartments were immediately damaged by Hurricane Harvey. The group’s updated analysis puts 75.1 billion dollars of property at risk, with multi-family apartments representing 18.5 billion of that total. With so many residents displaced in the wake of the disaster, the dynamics of Houston’s multi-family housing market will change dramatically.
Prior to the storm the Houston multi-family real-estate market was considered oversupplied and by some accounts up to 62,000 units of excess housing existed in the area. 89 percent of multi-family properties were occupied before Harvey’s arrival and the market had seen its first up-tick in 5 years. A combination of oversupply and consistent demand gave renters greater leverage prior to the storm. The competitive market forced land lords to offer lower rents in order to lease out excess housing. The amount of available apartment space will no doubt shrink in Harvey’s aftermath.
The market will be changed by a shrinking supply of multi-family housing. More and more locations are likely to be condemned due to storm damage. Demand will increase as residents and aid workers seek undamaged places to stay. It is estimated that 200,000 homeowners are currently seeking temporary housing. Ed Wolff, President of Beth-Wolff Realtors, claims occupancy rates for multi-family housing have risen to 97 percent as a result of Hurricane Harvey. Teresa Guidotti Lowery of Colliers International estimates the inventory of multi-family housing has shrunk to some 51,000 units with 30,000 residents already displaced. The available units will obviously fill up in record time. Lowery estimates the outlying suburbs of Houston might not recover for two years, increasing the demand for apartments in the area.
The market has clearly shifted in favor of land lords. Apartment space will likely remain at a premium in the Houston area for several years. The obvious flood risk may reduce new apartment construction in the future as insurers charge builders higher premiums. Lowery estimates a sustained increase in rental prices of 4.5 percent. This uptick is not only due to the increased demand from residents seeking temporary housing, but due to insurance pay-outs to landlords. As landlords rebuild and remodel they can charge even higher rental prices. Wolff claims that rebuilt properties can appreciate in value by as much as 10 percent.
In the short term the supply of apartments will dwindle as storm damaged is assessed and more properties are condemned. The demand for temporary housing on the part of displaced residents should cause a steep rise in rental prices. The obvious flood-risk of the area will decrease new apartment construction in the long term. The greater question is how fast can outlying suburbs be repaired? If repairs are delayed long-enough, displaced residents may choose to remain in temporary apartments, permanently. If that is the case the landscape of Houston may be permanently changed.
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About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.