Houston is a major metropolitan city in Southeast Texas with a population of over 2.3 million people. This makes Houston the most populous city in the state of Texas and the 4th most populous one in the US. The city is expected to experience population growth that is twice the national rate thanks to the strong net migration. This, along with the fact that the percentage of the population under the age of 44 is significantly high, boosts economic activity in Houston. And with around 56.8% of residents living in rental properties rather than owning their own homes (according to NeighborhoodScout), investing in a Houston rental property is a great option.
Houston enjoys a diverse economy and strong job growth. Home to over 5,000 energy firms, Houston is regarded as the US energy headquarters and the world capital of the oil and gas industry. Due to its central location within the US and the Americas, Houston is an important industrial base with access to global markets and ranks #2 in manufacturing GDP in the US. More than 230,000 industrial workers work in specialties such as fabricated metal, machinery, and chemical manufacturing. The aerospace industry is also an important part of Houston’s economy since the Johnson Space Center, NASA’s largest research and development facility, is located in the city. The Texas Medical Center in Houston is the world’s largest medical complex, providing clinical health care, research, and education at its 61 institutions. Other major industries include transportation and logistics, digital technology, finance, higher education, media, and retail. A total of 21 Fortune 500 companies are headquartered in the Houston region, ranking fourth among metro areas in Fortune 500 headquarters.
Tourism is vital to the local economy. The tourism and hospitality industry employs about 88,000 workers in the city and 140,000 across the metropolitan area. A convention hotspot, Houston has also established itself as an attractive leisure destination in recent years. It is home to many cultural institutions and exhibits, attracting more than 7 million visitors annually to the Houston Museum District. A total of 22.3 million people visited Houston in 2018, including both leisure and business travelers. This provides ample real estate investment opportunities in the Houston short-term rental market.
The Houston real estate market was named one of the most important US Markets to Watch by PWC in its annual Emerging Trends in Real Estate: United States and Canada 2019 report. Judging by investment prospects by sector, Houston scored above average in nearly every category in the report. The city scored the best in the industrial category, followed by multifamily real estate and then housing. However, the report warns that disruptions in international trade due to a strong dollar and the potential impact of a trade war could disrupt demand for industrial space in the city of Houston.
|Facts and Market Trends in Houston|
|Homes For Sale1,400|
|Traditional Vacancy rate8.90%|
|Airbnb Occupancy Rate54.96%|
|Median Rent Price$1,893|
|Median Days on Market78|
|Price to Rent Ratio18.3|
|Average Cap Rate|
|Average Rental Income|
|Median Household Income$63,802|
|RENTAL STRATEGY||STUDIOS||1 ROOM||2 ROOMS||3 ROOMS||4 ROOMS|
The Houston real estate market has witnessed a strong real estate appreciation in recent years. According to NeighborhoodScout, since the beginning of 2000, Houston property values have increased by 113%, which is an average annual appreciation rate of 4.01%. Zillow reported a 4.5% increase in home values over the past year, meaning Houston homes continue to enjoy appreciation.
The Houston housing market is currently a buyer’s market, meaning there are many more available houses for sale than buyers seeking to purchase properties. This is the ideal time for prospective investors to buy a Houston real estate property since they have more choices, and home prices tend to be lower because of the increased supply.
Considering the importance of tourism in Houston, it comes as no surprise that the Houston Airbnb business has witnessed major growth in recent years. In 2018, a total of 512,000 Airbnb guests stayed at Greater Houston short-term rentals, bringing a total revenue of $72 million to the local Airbnb hosts. This means a Houston Airbnb host typically earns about $5,100 annually.
Despite increasing Airbnb legal issues in other major real estate markets across the US, Airbnb rental properties remain fully legal in the Houston housing market. The city has not enforced any laws to regulate the use of short-term rentals. Nevertheless, Houston Airbnb hosts are expected to pay a city hotel occupancy tax of 7% in addition to a 6% state hotel tax.