Houston home sales end in 2022 with a thump, market winning streak ends

Houston’s housing market winning streak has come to an abrupt end as local real estate experts look to better news in 2023.

A new report from the Houston Association of Realtors shows home sales fell nearly 11% in 2022, the first time the market has been in the red since 2015. A combination of factors contributed to this decline, including a sharp increase in mortgage rates earlier in the year and still low inventories for potential homebuyers.

Despite the year’s decline, Houston has avoided the housing nightmares seen in other parts of the country last year. In fact, house prices in 2022 are largely unchanged, with only slight declines compared to 2021. The total dollar value of all types of properties sold in Houston is down about 1.5% from 2021 to just under $40 billion.

“We didn’t have bubbles as huge as some other parts of the west, and in the east they were where they fell very hard,” said HAR chair Kathy Trevino. “Prices have always come down gradually in Houston, so I foresee them going down in the same way. Gradually they will decrease.

The median home price in Houston last month was $409,777, up about 5% from December 2021.

The year ended with the worst month for home sales. December sales fell nearly 33%, home sales in Houston down for the ninth month in a row. Sales fell in all price segments, including a 35% drop in sales of homes valued at $1 million or more.

Inventory was one of the key drivers behind the decline in sales in Houston, although this figure has been slowly improving. Last month there was a 2.7-month supply of vacant housing. During a pandemic, deliveries usually did not exceed two months.

“The norm is six months of inventory, and the statistics say that anything less than six months of inventory is a seller’s market, and we’ve been in a seller’s market for quite some time now,” Trevino said.

Real estate experts have reminded buyers that while mortgage rates are much higher than last year, they are still relatively affordable. Buyers are accustomed to rates below 3% and find it difficult to accept current rates in the range of 6-7%. Compare that to 1981, when mortgage rates were nearly 17%. Over the past 50 years, they have averaged over 7%.

“6% is actually pretty good when you look at the average over the last 50 years,” Trevino said.

Home sellers still have more leverage in the current housing market, but this may be slowly changing. Houston home prices are expected to continue to decline as sellers who have set unrealistic prices on their homes look to finally sell them.

“We are starting to see house prices normalize,” Trevino said.

Experts say it could be a long time before the Houston market calms down after the roller coaster of the past few years. Many potential homebuyers have decided to wait, hoping that mortgage rates will fall and Houston homes will become more affordable.