Latest Quarterly Snapshot

According to Zonda, in 2Q25, the Houston market saw New Home Lot Supply Index (LSI) hit 71.8, signifying that the Houston market is still significantly undersupplied. While the LSI index was up 21% year-over-year, builders have slowed production due to economic uncertainty and oversupply of homes for resale. Single-family home closings totaled 8,588 in June 2025, a 12.5% increase compared to the same period in 2024, reflecting a late-quarter boost in buyer activity. However, the market is also experiencing growing housing inventory, with active listings reaching 59,492 in July, the highest on record for Houston and a 27.2% increase from the previous year. This surge pushed months of available inventory to 5.4, up from 4.2 a year ago. In Texas, builder activity also slowed in 2Q25 as softer demand and rising resale inventory reduced the pace of lot-to-start conversions. In May, Houston and Dallas accounted for nearly 80% of Texas' new residential permits, though overall activity remained below peak growth periods.

Houston's retail construction pipeline remains robust, with approximately 3.4 million SF under development, primarily in the Far Northwest (Cypress, Bridgeland, Tomball and Magnolia), Far North (Conroe, Huntsville, Willis, and New Waverly), and Katy areas, driving an increase in upcoming supply. However, in 2Q25, a lack of absorption led to a 10-basis point rise in the overall vacancy rate, from 5.4% to 5.5%. This slight increase in vacancy is due to new spaces being filled by new construction rather than the absorption of existing vacancies. While supply and demand had been in close balance in recent quarters, with most of the net absorption going into newly delivered properties, the market is now adjusting as retailers take a more cautious approach amid economic uncertainties. As tenant absorption lags behind the influx of new space, vacancy rates are rising, suggesting potential shifts in leasing strategies and tenant demand moving forward.

During the 2Q25, Houston's industrial market saw a substantial increase in new supply, with approximately 3.8 million SF of space delivered. This new inventory surpassed the 2.1 million SF of net absorption during the same period, contributing to a slight rise in the overall vacancy rate, which now stands at 7.1%. The development pipeline remains strong, with 19.1 million SF currently under construction, reflecting a 14% growth from the previous quarter. Despite the higher vacancy rate, the market remains resilient, supported by consistent demand across key submarkets and industries.