The Best Texas Market

by | Jan 9, 2025 | Real Estate

The Best Texas Market-"Texas Real Estate Investment Trends"


The Real Estate Espresso Podcast
1x
SpotifyPlayer EmbedGoogle PodcastApple PodcastSubscribe via RSSShare Leave a ReviewListen in a New WindowDownloadSoundCloudStitcherSubscribe on AndroidAnchor
Powered by the Simple Podcast Press Player

The Best Texas Market

Welcome to the Real Estate Espresso podcast, your morning shot of what’s new in the world of real estate investing. I’m your host, Victor Menasce. On today’s show, we’re examining the most attractive market in Texas for investing in multifamily apartments. For this analysis, we’ve studied recent market reports from Marcus and Mila Chap. We’re going to look at four markets today: Dallas, Houston, Austin, and San Antonio. These are four distinct markets, each with their own local nuances. The Dallas-Ft Worth metroplex, for example, consists of over 200 separately incorporated municipalities, ranging from Dallas, with a population of 1.3 million, down to tiny towns like Alma, with only 300 residents.

As we compare these markets, we’ll consider the economic drivers and also acknowledge that all of these markets have been grappling with a surge of new supply initiated in 2021 and projected to hit the market in 2022, 2023 and 2024. This influx responds to strong demand during the pandemic, as people moved from congested metro areas in the northeast and California to seek larger open spaces and a more favorable business and tax environment in Texas.

Let’s start with Dallas. Job growth is expected to reach 1.5% in 2024. This is a deceleration from 2023’s 2.4% gain. Dallas Fort Worth leads all other major markets in terms of new deliveries for 2024. With over 10,000 more units than the next closest market, this constitutes a significant amount of new supply, representing a 4.2% annual supply expansion. This wave of new supply is predicted to push the vacancy rate up to 7.5% by the end of this year. Despite this, net absorption is also expected to reach near record levels, indicating significant demand.

Now, let’s delve into Houston, a unique market not just in Texas but in the entire nation due to the absence of zoning laws. This feature means virtually anything can be built anywhere provided it meets construction codes and utility requirements. Consequently, Houston perennially contends with more supply coming online than almost any other US city. The city’s job growth is expected to decelerate in 2024 but still carry positive momentum. However, the historic volume of new supply is expected to push vacancy up to 7.7% by the end of 2024.

San Antonio’s job market is predicted to slow from last year, with a projected annualized growth rate of 1.5%. A surge of new inventory, common across Texas, is expected to push the vacancy rate up to 8.9%. Despite this being the third consecutive year of increasing vacancy, net absorption is projected to reach near record levels. Price pressures are thereby expected.

The overarching trend then, is intense competition at the top end of the market in Texas cities. Conversely, the bottom end of the market, driven purely by affordability, remains full unless the property quality is particularly poor. Therefore, the middle of the market may stand to lose the most.

It’s crucial to ensure your product is significantly differentiated in order to be successful. Pay attention to new supply entering the market in the future, and if timed correctly, one can be well positioned to meet housing needs. Remember, the planning horizon should span the next 10 to 15 years, not just focus on the immediate or short term. And as you think about that, have an awesome day.

Stay connected and discover more about my work in real estate and by visiting and following me on various platforms:

Real Estate Espresso Podcast:

Y Street Capital: