As expected, transaction activity in Houston’s multifamily market in 2023 decelerated sharply throughout the year. Elevated borrowing costs, coupled with economic uncertainty and persistent wide bid-ask spreads for property pricing, weighed on investment activity, and across Houston, the total number of properties traded fell to its lowest number since 2010.

When analyzing investment preference by area, southeast Houston garnered the most sales interest of all of Houston’s 34 markets, followed by northwest Houston and southwest Houston. All of these areas house a significant amount of mid-priced units.

Across Houston, only 20% of all properties sold last year fell in the luxury cohort, as often, these types of properties are acquired by institutional capital, which is heavily reliant on the debt market and was largely on the sidelines last year.

Southeast Houston houses the largest concentration of apartment inventory in Houston and is one of the most populated areas in the metropolitan area. It appeals to residents for its affordability and is fortified by resilient demand drivers such as the Port of Houston, the downstream petrochemical industry, Hobby Airport, and NASA. The area is well served by some of Houston’s main highways, including interstates 610, 10, and 45, and residents can move through the region with relative ease.

Southeast Houston has a deep pool of renters-by-necessity. Local office jobs are limited, and incomes throughout most of the area are below the Houston median except the southern portion, where, due to the nearby presence of NASA and the ever-growing aerospace industry, median household incomes are often above $100,000 per year.

Value plays are popular in southeast Houston, owing to the market’s generally low-quality stock, and this proved to be the case in 2023: every property that sold last year was three-star or less. The most recent property to trade hands occurred in November when Houston-based Sentinel Capital purchased Canada-based Western Wealth Capital’s 244-unit Clear Lake for an undisclosed price. The 1979-built garden-style community was 91% leased at the time of sale. CoStar estimates that it sold for approximately $24 million, or $98,000 per unit.

This article originally appeared on CoStar Insight. It has been republished with permission.