Despite low inventory levels and climbing interest rates, Houston’s real estate market remained strong in March. The area typically sees an infusion of new homes every spring, but with buyer demand still sky-high, the market continues to lean in sellers’ favors. Is relief on the way for buyers? Let’s take a look at the numbers from HAR’s latest report.
Year-to-date, single-family home sales are 10.8 percent ahead of 2021 – a year that broke numerous real estate records.
Single-family home sales ticked up 4.1 percent in March with 9,693 units sold. This value is comparable to the 9,309 sales completed in March of 2021. The big difference? Prices reached record highs in February of 2022, pushing recent numbers to unprecedented levels. The average price of a single-family home soared 11.4 percent to $410,923. The median price jumped even higher by percentage points – 15.5 percent to $335,000, to be exact. This is the first time that average pricing for a single-family home has exceeded $400,000 in Houston.
In recent months, a dearth of homes priced at $250,000 and below has forced homebuyers to consider leasing or looking at pricier homes. Strong sales volume among higher-end homes signaled that many buyers were willing to make a financial sacrifice – even in a market that has grown familiar with bidding wars.
However, mortgage interest rates recently surpassed 5 percent – the highest rates in 12 years – causing some to wonder if the hot demand for real estate will begin to wane.
Condos & Townhomes
Intense market conditions led to another fantastic month for condo and townhome sales. Closings surged 8.7 percent to 861, and the average price rose 5.8 percent to $255,334. For those who prefer to refer to median pricing, the median price skipped 10.4 percent all the way to $215,000.
Despite rising prices, demand is still fierce. By the end of March, inventory sat at just 1.4 months. With homebuyers turning to condos and townhomes until market conditions change, it is becoming increasingly difficult to purchase this style of home – at least for now.
Leases & Rentals
The rental market continued to be supported by would-be buyers who opted to lease instead. Year-over-year, single-family home rentals jumped 18.3 percent. Leases of townhomes and condos remained the same as last year.
The price to rent also increased, with the average single-family lease rising 6.7 percent to $2,705. The average rent for townhomes and condos also increased, but on average, renters only spent $1,852.
Broken out by pricing, here’s how March’s 2022’s real estate sales performed:
- $1 – $99,999: decreased 32.9 percent
- $100,000 – $149,999: decreased 31.3 percent
- $150,000 – $249,999: decreased 36.9 percent
- $250,000 – $499,999: increased 24.0 percent
- $500,000 – $999,999: increased 36.1 percent
- $1M and above: increased 16.0 percent
The lack of listings priced at $250,000 and below contributed to sales distribution for the month. Homes priced between $500,000 and $999,999 increased a massive 36.1 percent. The $250,000 to $500,000 segment climbed 24.0 percent. Coming in third place, sales in the luxury market increased 16.0 percent.
Year-to-date, the market is 10.8 percent ahead of 2021’s historic pace. In addition, the total dollar volume of sales soared 15.7 percent to $4.6 billion. While more listings are entering the market, the demand for such homes has continued to outpace supply. With multiple offers on listings pushing pricing to new highs, the market remains ideal for sellers.
Days on Market – the time it actually takes to sell a home – also fell from 46 days to 38, indicating that homes that enter the market are selling faster than at the same time last year.
Buyers hoping for improved inventory were likely disappointed in March. Inventory levels registered as flat at just a 1.3-months supply, a level only slightly higher than the lowest supply of all time. In fact, the highest level within this past year was in August 2021, which saw a 1.8-months supply. According to the National Association of Realtors® (NAR), national inventory levels sit at just a 1.7-months supply. For perspective, a 6.0-months supply represents a balanced market in which neither the buyer or seller is at an advantage.
However, relief may be on the way for some. According to HAR Chair Jennifer Wauhob, “This is taking place amid a backdrop of continued supply chain problems and rising prices for everything from gasoline to groceries, which only adds to consumer pressures.” Rising interest rates may also serve to deter buyers. “We expect to see buyers start to pull back a bit until conditions stabilize, if indeed they do,” Wauhob suggests.
What Does This Mean For You?
Buyers: If you’re able to withstand rising interest rates and the increasing cost of living, hang tight in your home search. Forecasts suggest that economic conditions might force many would-be buyers to reconsider purchasing a home right now. This could lead to more options on the market and less chances you’ll run into a bidding situation when you put in an offer on “the one.” To keep a firm pulse on the state of the market and ensure that you don’t miss out on homes, consider hiring a Realtor® to advise and guide you.
Sellers: In case HAR’s latest report alarmed you, we want to remind you that March’s inventory levels sat at 1.3 months. A balanced market is traditionally considered to have a 6.0-months supply. The market still leans heavily in the favor of sellers. However, economic conditions may reduce the likelihood of receiving multiple offers, which may or may not have an impact on the price your home sells for. Partnering up with a real estate brokerage like Circa Real Estate to engage in serious marketing for your home can be the difference between receiving one offer or many offers.
Renters: Do increased rental prices have you sweating? It’s tough to say how prices might change. Due to inflation, interest rate hikes, and supply issues, many prospective buyers will be driven towards renting a home. However, some buyers who had given up their home searches due to low inventory levels might find some luck and leave their rental situations. We will keep you up to date on how this plays out! In the meantime, it can be helpful to work with a seasoned Realtor® who knows all about the best deals in Houston.
Have questions about renting, buying, or selling in the Houston and near-town areas? Get in touch with Circa Real Estate. They’d love to chat with you about how to make your real estate dreams a reality.