How did the Houston real estate market fare in the last months of 2022? Let’s recap the last few years to gain perspective.
When 2020 began, the economy was very strong, and the mortgage rate was low; to begin with, the Houston real estate market was moving at a brisk pace. As the year progressed, several market indicators changed drastically.
- A worldwide pandemic gripped the world in fear and rattled the economy at home and abroad. Some market sectors thrived, but most sectors that required gathering tanked.
- The Federal government responded with “stimulus” money to help people in desperate situations survive. Everyone understood this could lead to inflation, but no one was sure of the extent.
- As many as 40% of workers and most school-age students completed their tasks from home. No one knew how long these conditions would continue.
- With ready cash and the need for space, people began looking for homes with more space and better amenities. This real estate market took off and became red hot.
The hyperactive Houston real estate market continued throughout 2021. Prices rose and the inventory of available houses declined sharply. The low inventory drove prices higher still, and the mortgage rates remained low. However, the inflation that was anticipated began to surface in 2021. The Federal Reserve sets the criteria on which the mortgage interest rate is set. In order to stem the rising inflation, they steered the rates higher; this is standard practice and quite understandable. The mortgage rate continued to rise in 2022; the mortgage rate rose from approximately 3% to over 7%. As you can imagine, this cools the real estate market. So, let’s look at the last few months of 2022.
The Houston real estate market has dropped drastically; after an incredibly active two years, the market is returning to pre-pandemic sales levels.
- The Houston Association of Realtors reports 5,827 single-family sold in November 2022, which is 30.4% lower that November 2021 (8,374). However, this number is only 8.4% lower than in November 2019, marking eight straight months of decline.
- Townhouse and condominium sales have also been in a six-month decline, dropping 36% over this time last year.
- Total sales are down 30.2% and total dollar volume is down 28.2% compared to November 2021. However, both the average and median price of single-family homes continues to rise. The rise in price in Houston is around 7.8%, closer to a normal increase in real estate prices.
What does the future of the Houston real estate market hold?
No one knows for sure, but here are a few indicators of the direction of theHouston real estate market.
- Currently, pending sales are also down approximately 28.3%. However, more folks are listing homes—up about 51%. That means the inventory of available homes is up; currently, there is about a 3.3-month supply of homes—up from 1.4 months most of last year. For reference, a six-month supply is considered healthy.
- The difference maker for the coming year will be a change in mortgage rate. If the rate declines anticipate a sharp quickening of the sales pace. If the rate increases, anticipate the market to stay cool.