Q3 Report: Houston's Gain Only Temporary

"We certainly believe the occupancy is still not quite at the bottom," Greg Willett, editorial director for M/PF Research Inc. in Carrollton, tells GlobeSt.com. "It's a little ahead of completions, but it's not going to hold." He's predicting rock bottom will hit at 87.5%, possibly 88%.

With 14,000 units under construction, the city's pipeline is keeping pace with the nation's leader, Washington, DC. The difference is the capital is projected to add 80,000 jobs and Houston's forecast is 20,000, according to Willett.

Willett says Houston is the metro with the worst occupancy in M/PF's 57-city network. "As Austin started to get better, Houston started to get worse," he says about a title handoff. "Austin's occupancy is on the way up again. It's still soft, but there's quite a bit of momentum there."

Willett says Austin's recovery challenge will be to make up for a 6% cut in rents in the last three years, second only to the San Francisco Bay area for its backslide. As for Houston's rent, the effective rate changed 0.1% in a break from the past by staying out of the red by just a shade. Effective rent is now $659 per month.

Houston owners, like Dallas/Fort Worth's, have concessions in place at half of the properties in the 460,000-unit inventory. Willett's research team calculates cuts equate to 11% of rent quotes. He says a small amount of concessions is "smart" since the city, more so than its US peers, has wrestled with move-outs by homebuyers due to the affordable single-family housing stock. Despite the harrowing times, Houston, like the rest of Texas, remains on investors' radar screens. For a national picture, click here.