Houston real estate defies second year of pandemic, prepares for 2022

by Jennifer Wauhob

A global pandemic, building supply and labor shortages, dwindling inventory and rising home prices could not prevent the Houston real estate market from turning 2021 into a record year. Consumers never eased up on their demand to buy or rent homes, paying higher-than-normal prices as the supply of housing grew smaller. As a result, single-family home sales surpassed 2020’s record volume by more than 10%, and total dollar volume soared more than 28% to a record $40 billion.

The key to Houston’s pandemic-resistant housing market dates back to the spring of 2020 when the Houston Association of REALTORS® (HAR) leadership convinced local elected officials to designate real estate as an essential service. The move enabled Realtors to resume working with would-be homebuyers looking to take advantage of historically low mortgage interest rates as stay-at-home orders began to lift.

Realtors also assisted consumers seeking rental properties while waiting for more for-sale homes to be listed. In addition, HAR’s virtual technology allowed consumers to attend open houses and property showings remotely without putting their health at risk. Virtual technology remains in regular use even when pandemic conditions have improved.

It was impossible to know what 2021 would have in store for Houston real estate, especially as surges in coronavirus variants began affecting our area. Still, the need for housing never abated and Realtors delivered. Limited inventory and shortages of building supplies and labor also posed serious challenges, but the market powered through it all to achieve a record year. Now, with 2022 underway, inventory and affordability are serious concerns.

As we begin 2022, we find inventory at the lowest level of all time, a 1.4 months supply. This continues to keep sellers firmly planted in the driver’s seat. For years, a six months supply was considered the definition of a “balanced market.” Whether we ever return to that “balance” is a mystery. In fact, without the benefit of a crystal ball, the road ahead for Houston housing is filled with mystery.

High home prices and the prospect of rising mortgage interest rates have left would-be homebuyers sitting tight either in the homes they already own or in the property they are renting. Some will tell you they are waiting for more homes to hit the market, while others are waiting for prices to stabilize or fall. Unfortunately, we have no assurances that either of those scenarios will pan out.

As I write this, HAR has just published its January 2022 housing report. Sure enough, the market charged into the new year carrying the positive momentum it sustained throughout 2021. The strongest sales activity was at the highest end of the pricing spectrum because there is little to no inventory available below the midrange. However, with an inadequate supply of new listings to meet consumer demand, inventory overall remains at historic lows, and steady pricing increases coupled with rising mortgage interest rates offer no more clarity about what lies ahead.

In January, single-family home sales rose 7.1% with 6,451 units sold compared to 6,024 in January of 2021. Renters also kept the lease market in positive territory. As we have seen for a few months now, homes priced from $1 million and above drew the greatest sales volume increase for the month. In January, that segment registered a 52.2% year-over-year gain. The $500,000 to $1 million housing segment came second, surging 47.1%, followed by homes priced between $250,000 and $500,000, which rose 36.1%.

Once again, the heavy volume of high-end buying and lack of inventory of homes under $250,000 pushed overall prices upward. The average price of a single-family home rose 16.2 % to $377,738, while the median price shot up 17.9% to $310,000. While both figures represent highs for an average January, they are well below the historic highs reached last year.

The Houston housing market has proven resilient through tough times like Hurricane Harvey and other natural disasters. Years earlier, we rose from the depths of the Great Recession. Now, with an inventory and pricing squeeze, we will have to watch and see if balance is restored to the supply-demand equation so Realtors can help consumers navigate an easier path to the American Dream of homeownership.

Jennifer Wauhob is the 2022 chair of the Houston Association of REALTORS@.

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