Inverse Relationship Growing Between Multifamily Market Indicators and Appraisal District Perceptions
As the housing market continues its seemingly endless ascent throughout Texas, Appraisal Districts across the state have been suggesting that multifamily assessments will see increases in value similar to that of the past two years. At the same time, signs of rents slowing and even shrinking are popping up in the state’s two largest multifamily markets, according to the local media outlets.
Houston rental rates are seeing a continued decline heading into 2017 in many of the higher-end sectors of the city. According to Katherine Feser of the Houston Chronicle, average apartment rents in the Houston area [have] dropped to the lowest level in two years¹. Meanwhile, some less expensive sectors are seeing modest growth. The main culprit for the rate contraction in Houston is being laid at the feet of the overall job market where the energy sector’s weakening has resulted in sluggish hiring and even some corporate reductions.
In DFW the job market is not the culprit, but rather over-supply as developers torrid building pace is expected to saturate the market and surpass demand. Although rents are still on the rise in North Texas, growth rates across the metroplex are down 1.5% or more compared to last year, according to the Dallas Business Journal². In June of last year, the DBJ suggested DFW may be reaching a “vulnerable stage” with more multifamily units under construction than anywhere else in the country last summer³. At that time, demand was keeping pace with supply, but with more inventory coming online and sister markets like Houston already in constriction, there isn’t much margin to play with.