Rental Rumblings

A look back at Houston's dramatic rent increases in 2018 — and what's ahead

A look at Houston's dramatic rent increases in 2018 — and what's ahead

Best New Development, Mid-Rise Gables Tanglewood
Don't expect Houston's rent prices to level off. Photo courtesy of Houston Apartment Association

Houston is the country’s fourth largest city, an energy industry center, a port city, and a magnet for recent U.S. arrivals. This city has a ton of economic factors that may impact rent prices year-over-year; so, what have we seen so far in 2018 — and what's in store?

Apartment rent trends
Houston apartment rental prices have simply been on a tear since quarter one. The one-bedroom median rent price that began below $1,000 in January has climbed steadily and currently lists at $1,295. The two-bedroom median price that began in January at approximately $1,300 has dramatically risen to $1,580.

Both one-bedroom and two-bedroom units rose more dramatically in price from January to May. Then the one-bedroom basically leveled off, while the median two-bedroom price kept rising. In October, the median one-bedroom unit increased .78 percent, while the median two-bedroom unit rose an impressive 3.23 percent.

Outside of Houston
For those that want the Houston feeling without the higher prices, both Katy and Cypress reported small October rent decreases, but Spring, Shenandoah, Nassau Bay, and Oak Ridge North all showed increases.

Compared to the rest of the U.S.
Even with its crown as the fourth largest city in the U.S., a one-bedroom Houston apartment is considerably more affordable than New York City; Washington, D.C., San Francisco, and Los Angeles.

Looking ahead
According to the chart trend lines, apartment rents look to continue their increase. Some factors that are contributing to this rise include natural gas prices, oil prices, and interest rates. 

Natural gas prices that were at a low $2 range per mmBtu even in early January 2018 have now risen to $3.15. And, as natural gas prices traditionally rise in the coming winter months, $3.50 natural gas may become a reality. Oil just recently broke out of its $50-$60 trading range and topped near $74. Even though the Permian Basin has huge reserves and oil is being pumped as fast as it can be fracked, prices are still increasing as the solid economy has driven energy prices upward.

We do not see a short-term end to energy price increases, and this is good for Houston and its economy as the energy sector continues to add jobs. More Houston jobs mean more people are attracted to the city — and they need housing — so this will help drive apartment prices even higher.

Additionally, higher interest rates mean less affordable housing, and as the Fed continues to tighten, more of the population will be frozen out of the housing market due to mortgage interest rates nearing and crossing the 5 percent mark. This will also fuel apartment rent growth in the fourth quarter.

With higher energy prices, more demand, and higher interest rates on the horizon, look for Houston apartment rental prices to continue their climb into the fourth quarter of 2018.