Wednesday, March 22, 2017
Houston housing remains a top pick of investors
By Katherine Feser
Houston continues to be a top choice among home investors, who are drawn by low prices and strong returns compared with other markets, a new report showed.
Out of state investors, particularly from California, are eyeing Houston, according to HomeUnion's 2017 Single-Family Rental Research Report. The company is an online real estate investment management firm based in California.
"Though losses in the energy sector caused Houston to experience a drop in the number of new jobs in the market, the economy is recovering nicely today," Steve Hovland, director of research at HomeUnion, said in a report. HomeUnion projects a job growth rate of 1.3 percent in Houston compared to 1.7 percent growth nationally.
Cleveland, Columbia, S.C., and Memphis, Tenn., topped HomeUnion's list of metro areas with the highest cap rates, which measures returns on single-family rentals in the first year. Houston just missed the top 10 at No. 11 with a cap rate of 6.9 percent.
"Cap rates in Houston, which measure the relationship between purchase price and operating income for investment properties, are a draw for investors," Hovland said. "Few other markets offer cap rates at nearly 7 percent, which is much higher than the national average."
Single-family rents in Houston are projected to fall 0.4 percent to $1,591 in 2017, according to HomeUnion. Rental vacancy is anticipated to fall slightly to 7.3 percent.
The median investment home price appreciated to $162,900 in the third quarter. "We're seeing a lot of Houston and Dallas activity,"said Stacey Corso of HomeUnion. "I think it's the low entry prices and strong rents and prospects for a recovering economy."