State of the Industry: Multifamily Housing in West Texas and Lubbock
The 6th Annual Multifamily Summit provided an in-depth analysis of the multifamily housing market in West Texas, with a focus on Lubbock and surrounding secondary markets. Industry experts discussed market fundamentals, job growth, rent trends, occupancy, investment strategies, and new construction projects. Here are the key takeaways from the event.
Market Overview: Stability Amid Economic Pressures
Lubbock continues to show steady job growth at 1.6% per year, with a diverse economy driven by healthcare, agriculture, and education. Despite broader economic challenges, Lubbock’s rental market remains resilient, with 48.2% of households renting and demand for 51,146 rental units.
Key Market Metrics:
- Population: 268,395 (growing at 0.61% annually)
- Unemployment Rate: 3.7%
- Median Home Value: $219,973
- Median Rent: $1,134
- Median Mortgage Payment: $1,600
This rent-to-mortgage disparity highlights the growing affordability gap, making renting a more attractive option than home ownership for many residents.
Rent Growth & Occupancy Trends
Lubbock’s Performance:
- Rent Growth: 3.75% annually since 2015
- Occupancy Rate: Currently around 87-90%, slightly lower than in past years but expected to tighten as new supply levels out.
Regional Comparison:
Lubbock’s 15-year rent growth trends show it performing slightly behind Texas but outperforming national averages. The local rental market remains competitive despite a slight dip in occupancy.
Investment Climate: Navigating Higher Costs
Rising interest rates and operational expenses have significantly impacted the multifamily sector. Investors and property owners face higher borrowing costs, increasing taxes, and inflation-driven operational expenses.
Key Financial Insights:
- Loan Assumptions: Properties with fixed, low-interest-rate loans from 2020-2021 remain attractive to buyers.
- Expense Management: Owners are advised to reduce water costs, optimize maintenance expenses, and focus on tenant retention to sustain profitability.
- Net Operating Income (NOI) Importance: NOI directly impacts a property’s valuation. Even a 1% drop in occupancy can reduce a property’s value by hundreds of thousands of dollars.
Sales & Market Activity
Multifamily property transactions have slowed down significantly due to economic pressures.
- In 2021: Lubbock saw a record 37 multifamily property transactions.
- In 2024: Only 10 transactions have occurred so far, reflecting the tightened market.
Distressed sales are rising as owners with expiring low-interest loans struggle to refinance at today’s higher rates.
New Construction & Build-to-Rent (BTR) Trends
Despite economic pressures, new multifamily developments and Build-to-Rent (BTR) communities continue to expand.
Lubbock Construction Highlights:
- Annual Building Permits Issued: ~700
- Average Units Built Per Year: ~628
- Build-to-Rent (BTR) Growth: Projects like Tech Gables North, Haden’s Park, and Bell Farms BTR units are catering to renters looking for single-family-style living with rental flexibility.
Developers remain cautious, ensuring that new supply does not outpace demand.
Key Takeaways for Property Owners & Investors
- Tenant Retention is Critical: High turnover costs make keeping tenants a priority. Owners are encouraged to improve tenant experience through maintenance upgrades and flexible lease terms.
- Affordability Challenges Favor Renting: The growing gap between rent and mortgage payments is keeping demand for rentals strong.
- Expense Optimization is a Must: Property owners should reduce operating expenses, challenge property tax valuations, and invest in energy-efficient upgrades.
- Investment Opportunities Exist: Distressed sales and loan assumptions on low-interest properties present attractive buying opportunities.
Looking Ahead: What’s Next for Lubbock’s Multifamily Market?
While economic pressures remain, Lubbock’s steady job market, rental demand, and investment opportunities ensure that the multifamily sector remains a strong asset class.
Investors and property managers who adapt to rising costs, focus on tenant retention and seek value-add opportunities will be best positioned for success.
For more detailed data and insights, visit GoGetters Multifamily. Stay informed, stay competitive, and stay ahead in the evolving West Texas multifamily market.
Use the links below to download the summit materials.