The Houston land market was robust in 3Q23 as developers continued to sell sites for master planned communities and commercial development, while speculative land investors kept buying well-placed, large, strategic land tracts. Single-family home sales across the market fell by 10.9% in September 2023 with 6,886 units sold compared to 7,728 units sold in September 2022. Continued market pressure from high interest rates artificially suppresses home sales, and is putting significantly more pressure on commercial real estate transactions for buyers using traditional financing sources. As we head into 4Q23, we expect land sales to continue primarily for residential development with less land trading for commercial development.
The resiliency of the Houston retail market is being tested while absorbing the three-year high of new supply and dealing with an uncertain economy. A total of 4.5 million SF of new supply was delivered to the Houston market in 2021 and 2022. In 2023 the new construction pipeline expects to deliver approximately 4.9 million SF. Furthermore, the vacancy rate of 4.9% remained unchanged in 3Q23. The lack of construction in 2022 is a leading cause of the current vacancy rate. However, with most of the current new construction to be completed by the end of 2023, we forecast the vacancy rate to level off over the next few quarters.
The Houston Industrial market continues to be among the top three major metro areas in the U.S. for absorption with 21.2 million SF in the last 12 months. Therefore, in 3Q23 the positive net absorption continued to increase while the pace of growth slowed down. This is due to new construction supply outpacing demand. Nevertheless, there is still 23.5 million SF under construction that is scheduled to be delivered by the end of 2023. In the past decade, 196 million SF of space has been added to the market, growing its total inventory by 30%. Therefore, new supply has been a monumental factor in making the Industrial market what it is today.