Multifamily vacancy records first quarterly decline in over two years in Houston

The pace of multifamily completions in the Houston multifamily market has tapered off year to date, and vacancy conditions have stabilized. Projects totaling approximately 11,500 units came online during the first nine months of 2025, lagging last year’s record-setting pace by 20%. The vacancy upswing that began in late 2022 has eased in recent periods, as renter demand remains elevated. After spiking by 100 basis points in 2023, the rate has remained between 7% and 7.4% since the beginning of 2024. Area vacancy is currently 7.3%, up 20 basis points from one year ago. In Southeast Houston, the Clear Lake/NASA submarket is performing well, posting stable vacancy conditions and some of the steepest rent growth in the region. Asking rents in Clear Lake/NASA advanced by 3.2% during the past year, while vacancy is currently 7.1%, down 10 basis points annually.

Sales velocity in the Houston multifamily market continues to accelerate, as total transactions are trending closer to traditional levels. Total sales to this point in the year are lagging the region’s trailing 10-year average by 29%. While activity continues to trail traditional levels, the gap is narrowing. When applying this same comparison to the first half of 2025, transaction counts were down 37%. The Lake Houston submarket has made up 12% of transactions year to date, the greatest share in the region. Lake Houston is on track for the submarket’s strongest year of the past decade. Many of the properties changing hands in the Lake Houston area are 2010s and 2020s vintage assets with a strong emphasis on upscale amenities. Cap rates averaged 5.7% during the third quarter, up 10 basis points from levels recorded in the previous three months.

Looking ahead

Annual completions in the Houston multifamily market are on track to return to traditional levels after a combined 47,500 units came online in 2023 and 2024. Projects totaling 14,500 units are expected to be delivered in 2025; in the trailing decade, developers completed an average of roughly 15,500 units per year. With inventory growth tapering off, vacancy conditions should remain stable in the short term before trending lower in 2026. Prior to the heightened supply growth recorded in recent years, the vacancy rate ranged between roughly 5.5% and 6.5% from 2013 to 2022. Consistent renter demand has helped to keep rent growth generally positive despite the supply growth of the past few years. Asking rents should continue to inch higher through the end of the year. Rent growth should be more robust in 2026 as the market adjusts to the supply spike of the past few years.

Investment activity should continue to accelerate through the end of the year, as total sales for the full year will exceed the light levels recorded in each of the past two years. Houston has outperformed the other major Texas metros as the market has posted a gradual increase in rental rates during the past few years. Additionally, supply growth immediately returned to trend in 2025, and the current development pipeline is light. Between solid rent growth and limited new inventory being projected for 2026, Houston is positioned for a quick rebound after below-trend sales activity in recent years. The local market has demonstrated an ability to generate substantial transaction counts across all vintages during the past five years. While assets across the quality spectrum should continue to change hands, sales velocity for recently built properties should pick up as new developments lease-up.

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