The driving force behind Houston’s strong rental market

It’s no secret that the rental market in Houston has been outstanding, boosted by ever increasing demand by prospective tenants. Since 2005, I’ve seen rents increase almost 20% as properties get re-leased for higher and higher amounts each turnover. For example, a North Katy home that would fetch $1100-1150/mo six or seven years ago, consistently rents for $1350-1400 these days.

Great, so what’s behind this strong demand for rental properties that’s driving up rental rates in Houston? And most importantly, is this seven year trend just another bubble, a fluke or a fad?

The answer, as empirical as they come, was reported from the Houston Business Journal this morning. Texas jobs have now reached pre-recession levels:

Texas gained 410,400 net nonfarm jobs between May 2007 and May 2012, ranking the state No. 1 for raw change during that period, according to a Business Journals’ On Numbers analysis of U.S. Bureau of Labor Statistics data. The comparison period begins seven months before the official start of the recession in December 2007, meaning Texas surpassed its prerecession job level by a significant margin.

James Carville said it best: It’s the economy, stupid. Texas is a pro business state with a favorable business and fiscal “climate” that attracts successful businesses who create jobs. This job availability creates inward migration into the state which results in high rental demand as these folks need places to live that offer good schools, safety and amenities. So it is not a bubble or a fluke. It’s real growth with economic underpinnings – the strongest and most sustainable foundation for growth of any kind. So should you build a long term real estate investment strategy with quality assets in Texas? No brainer.

 

Creative Commons License Photo Credit: Rick Harrison via Compfight

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  1. […] credit tenants and rent escalations built into the deal. What’s most important is that this rush of demand is fueled by real economic and job growth, not some artificial inflation. Under the current conditions you could literally close on any […]

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