Writer: Andrea Teran
2 min read May 2024 — The Houston real estate landscape has been impacted by the increase in mortgage rates, which has dampened buyer enthusiasm. According to data from the Greater Houston Partnership (GHP) in their March 2024 monthly update on home sales, the market has experienced its slowest pace since before the pandemic. Median sales prices have remained stable over the last 18 months, despite historically low closing rates. The median price of a single-family resale home stood at $330,000 in March 2024, a slight increase from the previous year but still below the peak of $334,900 in March 2022.
“In the real estate cycle, there has been a notable shift from a sellers’ market to a more balanced one, presenting a unique challenge,” said Jennifer Hughes Hernandez, senior loan officer at Legacy Mutual Mortgage in a recent interview with Invest:. “Houston, while not regressing, is experiencing an unusual quagmire of continuing demand with low inventory. Despite a considerable desire to buy houses, even with current interest rates, only a fraction of my 80 referrals received per month result in closings. The pent-up demand is still unprecedented, driven by people rethinking their living spaces due to the post pandemic.”
Rising mortgage rates have been a key factor influencing buyer behavior. By April 2024, the 30-year fixed mortgage rate had reached 6.99%, up from 6.78% in February 2024. This trend has discouraged some potential buyers, particularly as rates continue to hover significantly above historical norms. The median price of a single-family resale home in Houston was recorded by the GHP monthly update at $330,000 in March, reflecting a marginal increase from the previous year but a slight decrease from the peak in 2022.
The supply of single-family resale homes is approaching pre-pandemic levels, with 24,798 homes listed in March 2024 through the Houston Association of Realtors (HAR) Multiple Listing Service reported on the GHP monthly update. This represents a substantial increase from 19,374 in March 2023. The current months of inventory has risen to a 3.5-month supply, indicating a shift towards a more balanced market, where neither buyers, nor sellers, hold a distinct advantage. According to the HAR March 2024 Market Update, the Houston area saw a 7.0% decline in total property sales year over year and single family home sales dropping to 7.5%, marking the first decline this year for this segment.
The Houston suburbs are seeing significant activity, particularly in areas north of Houston where affordable housing options are more plentiful. Areas such as Porter/New Caney West and Conroe Southeast have reported significant increases in home sales in a recent quarterly report by HAR, driven by new construction and the allure of more affordable housing options compared to the city’s center. Meanwhile, the build-to-rent sector is expanding rapidly, with Houston ranked third nationally in such developments. In contrast, the market for townhomes and condominiums is also evolving, with HAR reporting sales falling by 6.7% year-over-year.
“Houston will need more single-family and multifamily housing in the future as more people move in,” Danny Schroder, Houston region chairman at PlainsCapital Bank stated to Invest: recently. “With an easing or at least stabilization of interest rates, demand should come back robustly.”
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