A rush of new listings entered the market as the pace of home sales continued to slow in July. Houston’s housing inventory is now the highest it has been in two years. However, factors like inflation and rising interest rates have given some prospective buyers reasons to pause. Read on to learn more from HAR’s recent report.
Single-family home sales plummeted 17.1 percent year-over-year, with 8,370 units sold. Although summers are typically a busy time for real estate sales, these numbers represent the biggest monthly drop in sales volume since January 2022.
Despite decreased sales of all other home types, sales of properties in the $500,000 to $1 million segment surged 40.6 percent. The smallest decline in sales was among homes priced between $250,000 and $500,000. Consumers continue to navigate a market scant of homes priced under $250,000, forcing many to consider options like renting or postponing buying.
Compared to June, prices in July decreased. However, year-over-year prices tell another story. The average price of a single-family home jumped 9.9 percent year-over-year to $426,494, and the median price soared 12.7 percent to $348,740. It is worth mentioning that the average price of a single-family home in July was well below May’s record high of $438,844.
Before you take a look at cooling prices, consider this: the average price for a single-family home first breached the $400,000 mark this past March, and the median price has been planted firmly above $300,000 since May of 2021. Values have jumped considerably since these records were first broken.
HAR also broke down figures for sales of existing single-family homes, which were down 20.3 percent year-over-year. However, the average price increased 10.4 percent to $427,931, and the median price soared 11.5 percent to $340,000 – the second highest number of all time.
Condos & Townhomes
With inventory for standalone single-family homes creating frustration for many buyers, some have turned to condos and townhomes. This trend continued in July, but sales dropped a whopping 21.5 percent compared to the same month last year.
The average price ticked up 5.0 percent to $257,834, and the median price jumped 9.7 percent to $220,000. Both numbers are below record highs established in April 2022.
Inventory fell year-over-year from a 2.5-months supply to 2.0 months, complicating sales. Without an infusion of new listings to the townhome and condo market, prospective buyers may continue to find this segment difficult to explore.
Broken out by pricing, here’s how July 2022’s real estate sales performed:
- $1 – $99,999: decreased 39.4 percent
- $100,000 – $149,999: decreased 34.9 percent
- $150,000 – $249,999: decreased 49.6 percent
- $250,000 – $499,999: decreased 9.2 percent
- $500,000 – $999,999: increased 40.6 percent
- $1M and above: decreased 52.5 percent
Sales in the $500,000 to $1 million segment leapt 40.6 percent, representing the only positive numbers in July’s sales volume. Notably, sales in the $1 million and above segment plunged 52.5 percent – a massive change from numbers established when interest rates were more affordable.
Overall, July ended with year-to-date sales 1.3 percent behind 2021’s record pace. It remains to be seen how the remainder of the year will factor into overall sales volume, but without positive changes to the economy, the cooling market may be with us for a while. In addition to the drop in single-family home sales, pending sales dove 12.5 percent.
Although active listings surged 30.0 percent as sellers seek to take advantage of high sales prices, reduced sales volume led to a decrease in total dollar volume of 9.0 percent to $4.1 billion. The Close to Original List Price Ratio also dropped to 98.9 percent in July, signaling that the majority of sellers were no longer able to demand sales over list price.
Inventory ballooned to a 2.5-months supply, giving prospective buyers a reason to celebrate. This is the highest level since August of 2020 when inventory reached 2.6 months. In July of 2021, inventory sat at a paltry 1.7 months. Nationally, inventory rests at a 3.0-months supply. However, the market still remains far from balanced: a 6.0 months supply is considered one in which neither the buyer nor seller has an advantage. Days on Market remained steady at 26 days.
According to HAR Chair Jennifer Wauhob, “The scorching pace of Houston housing throughout most of the pandemic was completely unsustainable, so the cooling that we have experienced over the past four months was expected and is all part of a market normalization. As long as we continue to see inventory grow and prices level off, I believe homebuyers will move off the sidelines and back into the marketplace. An easing of interest rates would help as well, particularly for first-time buyers who desperately want to seize the American Dream of homeownership.”
What Does This Mean For You?
Buyers: Rising inventory brought a sigh of relief to many buyers in July. However, high interest rates, uneven distribution of new listings among certain price points and home types, and a market that continues to favor sellers are potential reasons for prospective buyers to cease a home search. However, it might be a mistake to hold off. Declining prices can benefit buyers’ wallets. Partner up with a real estate agent to find the best deals as housing options grow.
Sellers: Have you seen an uptick of “For Sale” signs on your street? It might be because declining home prices and the state of the economy have spurred potential sellers into action. Demand for homes has decreased as some buyers have been pushed out of the market. In addition, you should know that the majority of sellers could no longer command prices above list value in July. Unless economic conditions change, the market may continue to cool. As inventory grows, a quick sale may become more challenging. Talk to a Realtor® to better understand where the market is heading, what to expect in the sales process, and how changes to the market might actually make it easier for you to find your next home.
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.