Between 2019 and 2021, the Houston housing market smashed record after record, topping 106,000 home sales during 2021.
Low-interest rates resulted in a well-documented home-buying frenzy during 2020. In turn, this caused a 10% increase in sales over 2019’s previous all-time high.
This trend continued throughout 2021, making Houston one of the hottest property markets in the country. Other factors behind the hot Houston property market include low real estate taxes, a strong job market, and a young population.
The frenzy only started to subside halfway through 2022, thanks to dwindling supply, interest rate hikes, and limited construction projects. Even so, sales fell just short of 2021’s record-breaking figures, although prices eventually started to cool.
These incessant increases naturally led to fears of a pending housing crash. Yet, this never happened.
Considering these uncertainties, what will 2023 hold for prospective Texas homebuyers and sellers?
Thanks to these extraordinary circumstances, the last few years provide no clues about what to expect from the Houston real estate market as the new year gets underway.
Let’s look at some expert predictions surrounding what might happen to Houston housing prices this year.
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1. Houston’s Real Estate Market Will Relax in 2023
Shafaq Patel and Sami Sparber spoke to local experts about what to expect from the Houston-area housing market this year.
Overall, these real estate professionals expect the market to approach normalcy during 2023.
Jennifer Wauhob, 2022 chairperson of the Houston Association of Realtors, points out that a steady, but gradual, decline in Texas home prices has allayed fears of a housing market crash.
This means buyers and sellers are resuming their real estate activities at a rate that’s more in line with pre-pandemic trends.
However, she warns that those who missed the chance to take advantage of low-interest mortgages might find current home prices challenging. On average, single-family homes are still selling for around $400,000.
Other predictions include:
More Leverage for Buyers
According to Nicole Lopez-Cummins of Mark Dimas Properties, increased inventory will create a more relaxed buyers’ market. This means a move away from pressured decisions and the urge to buy a home as soon as possible.
That means buyers can consider their options for longer and in more depth than before.
During the last few years of minimal interest rates, many buyers were offering well above the asking price for homes. Cathy Treviño, Chair of the HAR for 2023, remarks that buyers are now making offers more in line with the asking price.
A Return to Seasonal Cycles
Paul Silverman of Martha Turner Sotheby International Realty, predicts the forecasted dip in interest rates will give hesitant buyers extra purchasing power.
In turn, this increased pool of buyers helps support the ebb and flow of people upsizing and downsizing their homes as needed, instead of holding on to them for lack of alternatives.
HAR’s Treviño adds that spring and summer should bring the usual uptick in sales as people start to recover from holiday spending.
She also points out that those who’ve been renting to ride out the hot property market in Houston may resume their searches for a home as prices continue to slide.
The Suburbs Are Still Booming
As prospective buyers continue their search for more space, Houston continues to expand outward. For instance, Treviño points out that there’s high demand for homes in suburbs like:
- Crosby
- Atascocita
- Kingwood
- Woodlands
- Katy
In 2021, The Woodlands managed to achieve the number one spot in Niche.com’s ‘Best Places to Live’ rankings. That’s thanks to its family friendliness, low crime, and excellent amenities.
For those lucky enough to continue working from home, these pristine suburbs remain a top choice.
2. The Houston Housing Market Is off to a Stable Start This Year
Karen Alvarez of ABC reports that a recent study highlights Houston as the eighth most stable housing market in the US as 2023 gets underway. These researchers used inventory, inflation, and interest rates as factors to better gauge what to expect from the housing market in 2023.
According to Cathy Treviño of the Houston Association of Realtors, the holiday season is typically the slowest time for real estate transactions. This usually changes as the summer rolls around and Houstonians consider buying or selling their homes for a fresh start to the new year.
Treviño reiterates that the sellers’ market is making it hard to predict exactly how things will look in 2023, but so far things have remained stable.
Homes are staying on the market a little longer, but this is leveling off the market to provide more opportunities for buyers. It is likely buyers will have more leverage, suburbs will boom, and the seasonal cycles will return to normal.
She highlights the trend toward investors and home buyers choosing Houston for offering value for money when compared to other housing markets around the country. Experts agree that there’s currently enough supply to meet the demands of these buyers, despite interest rate fluctuations.
At present, the average price for a single-family home in Houston is around $400,000, just above the national average of $366,900.
Overall, this article emphasizes that it’s too early to tell what may happen in the realm of Texas real estate. Currently, it’s best to consult a real estate professional for assistance with navigating the complexities of the Houston real estate market.
3. Houston Home Sales Take Another Hit
In another article, Jack Williams, the executive producer for daily news at Houston Public Media, looks at the reasons behind declining home sales in the metro.
In November 2022, Houston home sales dropped 30% when compared to the previous month. This was the biggest decline of 2022, driven by factors like high mortgage rates and limited inventory.
A corresponding report from the Houston Association of Realtors indicates a 45% decrease in sales of homes valued at $150,000 and $250,000. Homes priced above $250,000 experienced a 27% reduction in sales during November.
Townhome and condo sales also dropped 35% in November 2022.
Nationwide, mortgage rates are currently double what they were in 2021, while home prices remain stable. This has created caution on the part of buyers, who’d rather wait for cheaper prices.
As a result, there’s a high demand for rentals at present.
These are all signs that the Houston housing market is normalizing when compared to the unusual conditions of the last two years.
Jennifer Wauhob of the Houston Association of Realtors, emphasizes that a 30% drop in sales isn’t so scary when one considers the abnormal excesses of 2021 transactions.
Year-on-year, Houston home sales are down almost 9% in 2022. This places November’s numbers just off the sales figures recorded in 2018 before the onset of the pandemic.
Other good news is that Houston’s housing inventory has improved. Now there is almost 3 months’ worth of housing available for sale.
A shortage of inventory in the past few years was a major driver behind soaring prices and bidding wars on available homes.
Expert realtors view six months of inventory as conducive to a balanced market. So, this increase is a step in the right direction for Houston real estate.
Sales might have dropped, but home prices are still on the rise throughout the Houston metro. In November, prices were still around 6% higher when compared to the previous year.
January 2023 saw similar increases, with housing prices escalating by around 6%. Homes are staying on the market longer, too, causing sellers to lower their prices or remove their homes from the market.
The average single-family home lingers for around 45 days before it sells, ten days longer than in November 2021.
Despite the slowdown in the market, Houston is standing up well to the slump when compared to similar cities. Other large metros have seen dramatic price decreases in the last eight months.
Houston Housing Market Key Takeaways
Overall, the Houston housing market has a favorable outlook. It’s still one of the more affordable cities to live in since real estate prices never reached the extremes seen in Austin and other Texas cities.
Houston escaped a huge influx of buyers from high-priced areas between 2020 and 2022, which helped keep home prices lower.
There’s still much uncertainty surrounding the future of real estate in Houston, although some constants remain. These are:
- Seasonal fluctuations
- High buyer interest in the suburbs
- Steadily decreasing prices
- Increasing inventory
- Significant value
Overall, these factors point to a steadily normalizing situation, which bodes well for stability in the real estate market. Realtors agree that increasing inventory levels coupled with steady buyer demand are signs of a healthy market undergoing a slight adjustment.
Home sellers might not enjoy the massive profits and fast sales we’ve seen in recent times, but they’ll still achieve a satisfactory outcome when placing their homes on the market.
