Houston apartment demand came in at about 1,400 apartments during 2010's initial quarter. That's not a bad result for a metro that suffered more than 8,000 net move-outs during calendar 2009, but Houston certainly didn't display the demand momentum seen elsewhere in Texas during the first few months of the year. Quarterly absorption proved more than four times stronger in comparably-sized Dallas/Fort Worth. And the much smaller Austin and San Antonio markets registered quarterly demand about a third better than Houston's performance.

Part of the explanation for Houston's lesser demand momentum probably lies in the state of the local economy. While figures currently available from the Bureau of Labor Statistics (BLS) show very similar shifts in the job change patterns across the major markets in Texas (with all of them beginning to register job formation on a month-to-month basis), it's likely that the BLS is either overstating Houston's upturn or understating the rise in Dallas/Fort Worth, Austin and San Antonio. Particularly suggesting that pattern, Houston is not yet showing any demand for middle-tier apartment product, whereas the other Texas markets are. (All of these metros displayed considerable demand for top-tier properties even when they were losing jobs. None of them yet show much progress at the very bottom end of the market.)

Also likely influencing Houston's early 2010 apartment demand figures, operators proved surprisingly reluctant to cut rents further. While same-store effective rents fell by a notable 4.5 percent during the year-ending March in Houston, only 0.2 percent of that backtracking occurred specifically during 1st quarter.

With Houston's early 2010 apartment demand failing to keep pace with completions, overall occupancy eased by another 0.2 percentage points during the initial three months of the year, falling to just 87.3 percent. That March occupancy reading was 2 full percentage points behind Dallas/Fort Worth's rate and about 3 points under the figures seen in Austin and San Antonio.

The fact that nearly all of Houston's remaining apartment construction (roughly 4,800 units) is targeted to wrap up during 2nd quarter points to some likely momentum during the 2nd half of the year. But, for now, Houston clearly ranks as the weakest performer on the Texas apartment scene.

Statistical information presented in this post is acquired, to some degree through property management systems and data collation at the city and county level.

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