HOUSTON—The Houston apartment market is experiencing a notable inflection point, showing significant signs of weakening under the weight of a suddenly sluggish economy and a surge of new apartments. Rent growth is slowing, vacant units are taking longer to backfill, fewer renters are renewing leases and income levels for new renters are falling, according to an MPF Research analysis of actual rent roll data from RealPage Inc.
While property surveys and Internet listings suggest the Houston apartment is holding up well in spite of the sluggish local economy, lease-transaction data pulled from rent rolls utilizing RealPage software paint a very different picture. Looking at rent roll data for November 2015 and January 2016, the number of lease applications dropped 3.5% compared to the same period a year earlier. During the same period, the number of lease renewals declined by 4.9%, which triggered a drop in resident retention rates. In turn, occupancy fell 0.7 points.
Additionally, the loss of high-paying energy jobs has led to a drop in income levels among new residents. New renters in 2015 reported incomes 4.2% below those in 2014. As a result, rent growth for new leases has completely disappeared. New lease trade-out (a measure of what a new renter pays compared to the previous renter of the same apartment unit) came in at -0.7% in December and 0.1% in January. The bottom line is since August 2015, total lease revenue in Houston is down 0.6%.
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