Market Moods and the Houston skyline.
Illustration by Lanette Behiry/Real Estate News; Shutterstock

Market Moods: Houston inventory back to pre-pandemic levels 

Buyers are in a better position this fall as supply increases and home prices level off in the Lone Star State's largest city.

November 14, 2023
4 minutes

Key points:

  • Houston inventory increased to the highest level in four years in October.
  • Median sale prices were down slightly year-over-year, though average prices saw a small gain.
  • Homes at the highest price point, which are typically new construction, saw the most sales activity.

Rising inventory and strong building activity for newly constructed homes have put Houston homebuyers back in the driver's seat.

The change comes at a time when moderating mortgage rates are giving seller more latitude to come off the sidelines and list their homes, according to Houston Association of Realtors Chair Cathy Trevino.

Data from HAR's latest market report shows Houston's total inventory grew by 12.5% year-over-year in October to more than 40,600 homes listed for sale across all property types. That inventory level is the highest that Houston has seen since November 2019, Trevino said.

"At this time last year, many homebuyers were putting their home search on pause and renting for another year because of high interest rates," Trevino said. "Now, the people who have been watching the market seem to be returning before interest rates pick back up."

Home prices level off, sellers more willing to negotiate

As housing supply has increased, price gains in the Houston market have eased. The metro saw an additional 0.8 months of supply in October, which helped push the median sales price for a single-family home down to $327,000 compared to $330,000 a year prior.

That means home prices in Houston are roughly 19% lower than the national median of nearly $407,000 in the third quarter, according to NAR's latest quarterly market report.

Still, average home prices rose slightly to more than $403,000. But both the area median and average sale prices were well below peak levels reached in 2022.

"Now that the market has shifted a little bit and homes are sitting on the market a little bit longer, prices are starting to come down, and sellers are a little bit more willing to negotiate," Trevino said, adding that buyers are now able to ask for concessions or make an offer below the asking price.

Pending sales up, but inflation remains a stressor

As buyers and sellers start to return to the market, pending home sales have ticked up. Pending sales in Houston rose 11% year-over-year in October — a mirror image of national trends, which saw pending sales fall by the same amount.

Trevino said October's data suggests the Houston market has remained "resilient" in the face of affordability challenges nationwide. She noted, however, that rising property taxes, food and gas costs are still points of concern for Texas homebuyers.

Data from the Federal Reserve Bank of Dallas indicates that Texas has the sixth-highest inflation-related stress rate with 52% of the population feeling stress from high inflation.

Sales of $1 million+ homes surge

One of the most telling data points in HAR's October report is that the low and high ends of the market are seeing increased activity while the majority of homes — those that list for between $150,000 and $1 million — saw sales fall.

Trevino attributed this activity to the types of inventory currently available. Properties priced under $150,000 are likely to be fix-and-flips or vacant land while the properties selling for $1 million and up are generally new construction.

Homes in the middle tier, which are more likely to be resale properties, have had a harder time attracting buyers, while sales of homes priced at $1 million and above increased by 21.3%.

"As we continue to gain more inventory, we'll definitely start seeing more sales come in," Trevino said.

Market could stabilize soon, depending on economic and political factors

Trevino said she is optimistic that Houston's housing market will begin to "level off" over the next year as inventory levels climb.

However, she pointed to the 2024 presidential election and the interest rate environment as factors that could influence the market.

"It's very hard to tell," Trevino said. "I wish we had a crystal ball but unfortunately we don't."

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