Hot SFH sales mkt + Apartment boom = Soft SFH rental mkt? (Houston: for sale, apartments)

[gwarnecke]

My wife and I have relocated out of the country and am planning to rent out our house, a well-kept property in popular west Houston neighborhood. Our listing agent opined that the SFH rental market, at least in this area, has been soft lately, with many homes sitting on the market for months and ultimately renting for 15-20% less than they would have brought 1-2 years ago. She chalks this up to three factors:
- Apartment construction boom. Not as pronounced in our area as in some ITL neighborhoods, but I'd guesstimate that at least a few hundred units have recently been completed within a mile or so of our house. To be fair, all of these are high-end units, and their construction is compensated for somewhat by the demolition of older, run-down apartments in the area.
- Fewer O&G expats than a couple of years ago - perhaps consistent with the "right-sizing" of the Unconventionals business and the exits of large players from unprofitable fields?
- More investors buying 2nd/3rd/4th homes to operate as rental properties.

Just curious whether others have observed a similar trend in other parts of Houston? In our area, SFH sale inventory is extremely tight and prices have never been higher, but there are a handful of homes that have been listed for rent for 3+ months. Some of these homes sold within the past year, within weeks of being listed, and were immediately turned around and listed for rent. Does this portend a fall-off in sale prices, as investors get frustrated and start to dump properties that are difficult if not impossible to rent?

[ptt]

I personally knew a few oil and gas families try to rent a home and the rental price is between 4800-5200$ From 4500 asking price, they have to rent it from the picture online site unseen a month before they even got here to avoid losing out on the house.

[ToyYot]

Originally Posted by gwarnecke

She chalks this up to three factors:
- Apartment construction boom. Not as pronounced in our area as in some ITL neighborhoods, but I'd guesstimate that at least a few hundred units have recently been completed within a mile or so of our house. To be fair, all of these are high-end units, and their construction is compensated for somewhat by the demolition of older, run-down apartments in the area.
- Fewer O&G expats than a couple of years ago - perhaps consistent with the "right-sizing" of the Unconventionals business and the exits of large players from unprofitable fields?
- More investors buying 2nd/3rd/4th homes to operate as rental properties.

Just curious whether others have observed a similar trend in other parts of Houston? In our area, SFH sale inventory is extremely tight and prices have never been higher, but there are a handful of homes that have been listed for rent for 3+ months. Some of these homes sold within the past year, within weeks of being listed, and were immediately turned around and listed for rent. Does this portend a fall-off in sale prices, as investors get frustrated and start to dump properties that are difficult if not impossible to rent?

Apartments - yes, are a factor and there are hundreds more coming on stream right down the street from you.

Fewer O&G expats - likely, but also realize that your neighborhood, like ours, is not necessarily the first choice for highly paid expats.

My opinions---
- Private schools are paid for - don't need the schools so look elsewhere e.g. south of the bayou;
- They prefer gated communities being somewhat concerned about crime and the gun culture, so look elsewhere e.g. Lakes of Eldridge.
- They want the 'Texas' lifestyle, big modern house with a pool (and rents are paid for) - so look elsewhere e.g. Cinco Ranch.
- And, if no kids then yes, a high end apartment somewhat walkable to something (anything!) is preferable.

Investors - I was quite surprised to see investors buying houses in these neighborhoods, the cash flow just doesn't make sense. But buy they did and probably at a market plateau, so not the best decision. But anyone spending $600k+ on a rental property when the historical rental market only supports $4000 rents obviously isn't the best decision maker.

In any event, as a former renter there usually isn't much inventory but at the same time there isn't much demand. Anyone other than an expat would buy before shelling out $3000-$4000 per month on rent for any extended period.

In short, these neighborhoods are just not good markets for investors looking to rent out and IMO rents are not a litmus test for sales prices here.

[gwarnecke]

All good points. It does seem like the highest-end homes in the area ($4000/mo+, fully-updated with large yards and pools) actually rent more-quickly than the less-expensive properties, probably b/c expat housing packages can easily cover the higher rents.

Even if it takes the house awhile to rent and/or it stagnates in value, we'll probably hang onto it rather than pay seller's commission, buyer's commission, and closing costs to get out of and then back into the neighborhood, assuming that we come back to Houston.

[ToyYot]

Originally Posted by gwarnecke

Even if it takes the house awhile to rent and/or it stagnates in value, we'll probably hang onto it rather than pay seller's commission, buyer's commission, and closing costs to get out of and then back into the neighborhood, assuming that we come back to Houston.

Totally agree, in your situation I'd do the same thing.

[gwarnecke]

I shouldn't have worried, was able to rent the house in less than a week. Incidentally, tenant mentioned that there seemed to be lots of competition from expats for EC rental properties, and homes that weren't overpriced/stinky/in poor condition rented very quickly.

[EasilyAmused]

Originally Posted by gwarnecke

I shouldn't have worried, was able to rent the house in less than a week. Incidentally, tenant mentioned that there seemed to be lots of competition from expats for EC rental properties, and homes that weren't overpriced/stinky/in poor condition rented very quickly.

Something happened this week too. Several 1.5 million dollar homes just went pending. Either lending loosened up, or a company brought more people in.