Houston Real Estate Market Forecast for 2023

To find out more about the Houston real estate market forecast for 2023 and whether you should pursue your investment strategy, read on.

One of the main trends that make investing in the Houston real estate market a good idea is the population increase. Between 2010 and 2020, Houston’s housing market welcomed over a million residents—and it is expected to grow by another million by 2029.

Table of Contents

1. How Was the Houston Real Estate Market in 2022?
2. What Will the Houston Real Estate Market Be Like in 2023?
3. Should You Invest in the Houston Real Estate Market in 2023?
4. Pros and Cons of Investing in Houston Real Estate
5. 5 Best Neighborhoods in the Houston Real Estate Market for Long Term Rental Investment
6. How to Find a Profitable Investment Property in the Houston Real Estate Market

In addition to the people migration, Houston boasts notable business progress, with a number of companies expanding and boosting the local economy.

Whether people are moving to settle down in a new area or for business purposes, one thing is certain. People will always be in need of housing options. And it is something that many investors take into account when choosing Houston as the location for their next investment.

That’s merely scratching the surface as far as the Houston real estate market forecast is concerned, though. You are going to need more information and accurate estimates in order to make a well-calculated decision.

So, to find out if Houston is progressing or if it’s in a bubble—and whether it’s even worth pursuing your investment career in the Houston real estate market in 2023—keep scrolling.

How Was the Houston Real Estate Market in 2022?

The year 2022 is officially behind us, but as far as real estate investing goes, nothing is to be put aside. Every bit of information, including last year’s trends, is important.

It is to say that everything should be scrutinized here—the past, the present, and the future. So, before making a decision to invest in the Houston real estate market in 2023, you should reflect on what the real estate market looked like in the year behind us.

The interest rates were among the crucial factors that influenced both real estate investors and buyers. They already reached their peak percentage compared to the past six years. And just like the majority of the US housing market, Houston was no exception.

With a 6% interest rate, it was not surprising that the sales of single family homes declined in 2022. What is surprising about the said housing market segment, though, is that higher-priced homes—as in, the ones priced $500,000 and over—continued to sell.

For the Houston real estate market, October 2022 registered the most declines in home sales.

To some of us, it looked like Houston’s real estate market was going straight into a crash. Luckily, it managed to remain a seller’s market—even though homes were spending quite a bit of time on the market.

What Will the Houston Real Estate Market Be Like in 2023?

Houston went through a rocky 2022—but things are looking hopeful for 2023.

One thing that’s crucial to note here is that Houston is not in danger of a “real estate bubble.” It boasts strong employment numbers; the only difficulty that can shake things up is a mild recession.

Cathy Trevino, the chair of the Houston Association of Realtors and a real estate broker with Side Inc., agrees that the situation on the market also depends on Houston’s economy. But in her own words, the local economy is strong enough to withstand the rising interest rates and the recession that are weighing heavy on the US as a whole.

According to an article published in Axios Houston, experts believe that the market price will lower and stabilize throughout 2023—although at a slow pace.

Other noteworthy forecasts and predictions also point out that buyers should see more leverage than last year and that the popularity of the suburbs will continue to grow.

Although 2023 has just arrived, and everything’s still open to speculation, the most important thing is that the Houston housing market will not crash. It will simply require the investors to work around certain issues until the situation calms down.

Should You Invest in the Houston Real Estate Market in 2023?

The matter of whether you should invest in the Houston real estate market also depends on your goals.

Now that you’ve gone through the main trends and forecasts, you know that you don’t need to expect a market crash in the year ahead. However, the situation is not perfect—and it will certainly take some time before it stabilizes.

Nevertheless, the fact remains:

With Houston being the fourth largest city in the US, we believe that it offers lucrative investment opportunities—for those who know how to interpret the statistics correctly, that is.

For a more in-depth view, check out the latest statistics on Houston’s real estate market from our January 2023 Location Report:

• Median Property Price: $1,506,841
• Average Price per Square Foot: $332
• Days on Market: 14
• Monthly Long Term Rental Income: $2,344
• Long Term Rental Cash on Cash Return: 3.88%
• Long Term Rental Cap Rate: 3.96%
• Price to Rent Ratio: 54
• Monthly Short Term Rental Income: $1,867
• Short Term Rental Cash on Cash Return: 1.30%
• Short Term Rental Cap Rate: 1.33%
• Short Term Rental Daily Rate: $156
• Short Term Rental Occupancy Rate: 34%
• Walk Score: 46

Related: Investing in Houston Real Estate in 2023: Is It a Good Idea?

Pros and Cons of Investing in Houston Real Estate

After showing you a detailed Houston real estate market forecast, we would like to discuss a few notable advantages—and disadvantages—of investing in the said Texas housing market.

Pros

Let’s start with the advantages of investing in Houston real estate:

Population Growth

During the course of one year, Houston definitely gained more residents. According to recent reports, there are an estimated 2,366,119 residents in Houston currently. The majority are young individuals and growing families—which translates into an increasing need for housing.

Real Estate Market Developing

The forecasts for the Houston real estate market in 2023 are looking promising. Inventory for sale is back on track, with the local market gaining new housing options. It is safe to conclude that a market crash is not likely to happen.

Job Opportunity

With Houston’s booming economy, more and more job openings are luring residents to come and start their careers in the city. Young professionals can choose to work in biotech companies, research institutions, and many other industries.

Cons

And now, for the potential downsides:

High Interest Rates

While it is not going to cause a crash, the interest rates will continue soaring as we head into 2023. According to expert forecasts, they will level between 8% and 9%—which will pose a problem to the majority of home buyers.

Public Transport

Even though it ranks as the fourth largest city in the US, Houston still faces backlash for the not-so-great public transportation system.

Options are somewhat limited, and public transit can get slow at times. It is why many residents in Houston prefer to use their own vehicles.

Tornadoes

Out of all the cities in Texas, Houston experiences the most tornadoes per year. As you can imagine, such unwelcome weather hazards cause a lot of destruction.

Without proper insurance policies, investors may be faced with some massive out-of-pocket expenses required to cover the potential property damages.

5 Best Neighborhoods in the Houston Real Estate Market for Long Term Rental Investment

If you’re leaning towards investing in Houston long term real estate, we picked the top neighborhoods you should look into based on our January 2023 Location Report. The neighborhhods are arranged in descending order according to their respective cash on cash returns.

1. Second Ward

• Median Property Price: $406,204
• Average Price per Square Foot: $215
• Days on Market: 3
• Monthly Long Term Rental Income: $2,360
• Long Term Rental Cash on Cash Return: 4.35%
• Long Term Rental Cap Rate: 4.42%
• Price to Rent Ratio: 14
• Walk Score: 64

The first on our list is Second Ward—a historic neighborhood and an attractive investment opportunity for long term real estate. It’s famous because it is one of the four original wards of the city of Houston.

The neighborhood is known for being a very walkable area with lots of green spaces and a friendly atmosphere prevailing.

2. Greater Third Ward

• Median Property Price: $392,586
• Average Price per Square Foot: $226
• Days on Market: N/A
• Monthly Long Term Rental Income: $2,063
• Long Term Rental Cash on Cash Return: 3.49%
• Long Term Rental Cap Rate: 3.54%
• Price to Rent Ratio: 16
• Walk Score: 68

The second on the list of neighborhoods for investing in Houston long term real estate would be the Greater Third Ward. To the locals, the place is known for the fact that its population is mostly African American—with a rich culture and a strong sense of community.

Most residents here rent their homes. It is a good choice for families because there are a lot of public schools in the neighborhood. Additionally, young professionals looking for new career opportunities make up the majority of the population.

3. South Main

• Median Property Price: $351,850
• Average Price per Square Foot: $190
• Days on Market: 24
• Monthly Long Term Rental Income: $2,059
• Long Term Rental Cash on Cash Return: 3.40%
• Long Term Rental Cap Rate: 3.54%
• Price to Rent Ratio: 14
• Walk Score: 36

Investing in South Main is pretty much like hitting the real estate jackpot. A ground-breaking 73% of households in the neighborhood are renter-occupied. It’s a nice area, but you’ll certainly need a vehicle to get around and run your errands in a timely manner.

Moreover, South Main offers several high-quality playgrounds and parks that serve as great locations for recreational activities. In addition to enjoying time in nature, residents can find many different restaurants and coffee shops to help them pass the time.

4. Midtown

• Median Property Price: $380,154
• Average Price per Square Foot: $249
• Days on Market: 3
• Monthly Long Term Rental Income: $2,263
• Long Term Rental Cash on Cash Return: 3.39%
• Long Term Rental Cap Rate: 3.44%
• Price to Rent Ratio: 14
• Walk Score: 92

The fourth location for investing in long term real estate in Houston in 2023 is the Midtown neighborhood.

The area is close to downtown and is perfect for families looking for affordability. Generally, it is a safe place, registering a lower crime rate than other nearby areas—which is, of course, an important factor for families with kids.

However, being family-friendly is not the only perk of the Midtown neighborhood. It also boasts great nightlife. Someone who’s looking for new ways of entertainment will definitely like this area.

5. Downtown

• Median Property Price: $388,417
• Average Price per Square Foot: $310
• Days on Market: 11
• Monthly Long Term Rental Income: $2,247
• Long Term Rental Cash on Cash Return: 3.29%
• Long Term Rental Cap Rate: 3.34%
• Price to Rent Ratio: 14
• Walk Score: 95

Finally, the last on the list of neighborhoods suitable for investing in real estate is Downtown Houston. The area rightfully deserves to be on our list—primarily because it is so close to pretty much everything you could need.

Renting in Downtown Houston means the residents are close to landmarks, businesses, and shopping centers. And despite all the said attractions, it remains a very walkable area.

Finding a long term real estate property for investment is easier with the assistance of Mashvisor’s tools specifically designed to help you with your search.

How to Find a Profitable Investment Property in the Houston Real Estate Market

If you’re set on investing in the Houston residential real estate market in 2023, you need to be aware that there are several boxes that must be checked beforehand.

Discovering a successful residential investment is a time-consuming process that requires a lot of preparation, research, and evaluation.

Luckily, Mashvisor is always one step ahead—and ready to help.

To give you a headstart in your search for the best investment property, we would like to share some guidelines and statistics you should keep in mind when property hunting.

Pick the Location

Location, location, location—you are probably tired of hearing this, but it is still one of the top three indicators of a profitable real estate investment property.

When you’re doing research on a potential real estate market—in this case, Houston, Texas, real estate—it is essential that you take into consideration the outlook of the market. Make sure to also check out current statistics and prevailing market trends and check how they’ve evolved over the past few years.

There are a lot of questions you’ll need to answer here:

• Is the market’s economy strong?
• Has there been an increase in the population?
• Is it a popular tourist area?
• Does the location offer the necessary amenities?

As far as Houston, Texas, goes, it’s definitely a market that caught the attention of many real estate investors—especially over the past few years. As we’ve mentioned earlier, it is mainly due to population growth and increasing job opportunities.

Furthermore, Houston is a popular tourist destination—for both short and long trips. Looking at statistics, a record-breaking 22.3 million people paid a visit to Houston in 2018.

The city of Houston definitely offers its residents a wide range of activities—and it’s up to the investor to sort through the best-performing neighborhoods and make a list.

Related: The Most Profitable Types of Real Estate Investment for 2023

Check Your Budget

A common misconception about investing in residential real estate is that you must be rich to get into this type of business. That’s far from the truth, though.

A beginner investor will surely not have the finances of someone who’s been in this business for a long time. Then again, you don’t need to have millions saved to pursue your investment career.

When it comes to your budget, it is important to have a realistic picture of where you stand in terms of finances and what you can do with that money. In this regard, it’d be best if you have a financial adviser who will help you get started.

The good news is that there are alternatives for those on a relatively tight budget—including partnering up, private loans, and buying your own home, to name a few.

Decide on the Rental Strategy

The next step you must take to successfully invest in Houston residential real estate property is deciding on the rental strategy.

Here’s a hint:

In Houston, Texas, currently, the long term rental strategy is a more profitable option than the short term rental strategy. Why? The cash on cash return on short term rentals isn’t at its all-time peak at the moment.

Going with a long term rental strategy implies that the time duration over which you will be renting your investment property could range from a few months to several years.

That automatically means that you’ll be spending less time on the field. You will have fewer obligations and probably won’t have to inspect the property as often as you would with short term rentals.

Or, to put it this way:

Short term rentals generally require more involvement and commitment from the investor.

If you want to become a landlord but are not willing to deal with constant tenant swaps, then investing in long term real estate in Houston, Texas, is perfect for you.

Of course, it is just the beginning. There is a lot more to take into consideration—including laws and regulations, property management, potential income, and so on.

Related: Traditional Rentals vs. Short-Term Rentals: Which One Is the Right Rental Strategy for You?

Decide on the Type of Investment Property

You’ve pinned down the location and figured out where you stand financially and what type of rental strategy works for you. What should your next step be?

Choosing the right type of real estate investment property, of course.

Generally speaking, the two most popular options for long term investments are single family homes and multifamily homes. But what works for one real estate market may not necessarily work for another.

So, you should go back to te beginning of your research and check the trends for long term rentals in the area to determine which type of properties tend to perform well.

It’s important that you’re aware of the constantly changing trends. Even though single family homes might be popular at the moment, condos can easily end up being the long term rental strategy of the year ahead.

Use a Rental Property Calculator

Doing your own research and heading down to the real estate market to see things first-hand is definitely an unparalleled benefit.

Let’s not underestimate the importance of having a helping hand while you’re doing the math and trying to get an accurate estimate of the strategy you are working on, though.

Luckily, one of Mashvisor’s key tools, the rental property calculator, is specifically designed for real estate investors looking for up-to-date information on their potential investments. Our calculator gives you instant insight into the details that will help you make the final decision.

Some of the most notable metrics that can be found in the calculator include:

• Rental income
• Rental expenses
• Cash flow
• Cap rate
• Cash on cash return

 Sign up for a 7-day free trial with Mashvisor and gain insights into crucial information before investing in the Houston real estate market.

Final Remarks

We just covered the topic of the Houston real estate market forecast for 2023. It is a rather complex topic, though. We’d like to reflect on the main takeaways regarding the said housing market briefly.

As far as the 2022 Houston real estate market analysis is concerned, we can single out the following:

Single family home sales are dropping while highly-priced homes are being sold. Although it’s been on a rollercoaster ride, the Houston real estate successfully dodged a bullet, or bubble—to be more precise.

The 2023 Houston outlook hints at a positive experience for investors who choose to focus on the long term real estate strategy. Such a type of investment shows better-performing numbers at the moment. And some of the neighborhoods in Houston are already standing out as profitable hotspots.

But while Houston boasts a strong economy and is gaining residents, soaring interest rates and common weather hazards could make investors reconsider their decision.

Of course, deciding to invest in Houston residential real estate requires deep analysis, which includes researching the location and checking your budget. It also includes deciding on the strategy and the type of investment property.

Last but not least, the process also involves relying on an investment tool to help you add up all the numbers—and come up with an accurate estimate.

On that note, Mashvisor offers a helping hand to all prospective investors.

We encourage you to schedule a free demo with one of Mashvisor’s product specialists. We’re here to answer all your questions.