The Houston Association of REALTORS’ October 2022 Market Update shows that skyrocketing mortgage rates have contributed to a market cooldown in the Greater Houston area.

The report notes that October marked the seventh straight month of decreasing sales and increasing inventory. Single-family home sales fell 22.8% year over year.

While homes in all price ranges saw negative sales in October, the smallest decline in sales was that of homes in the $500,000 to $999,000 range. HAR predicts that lack of inventory priced below the $250,000 range will cause buyers to turn back to the rental market.

The average cost of a single-family home rose to $403,712 in October. While that’s significantly lower than the all-time highs seen in May of 2022, it’s still 7.2% higher than the $376,612 average seen in October 2021. The median home price has risen as well, up 8.4% to $330,500. The report notes that the median home price in Houston has not fallen below $300,000 since May 2021.

“The Houston housing market is heading towards more balanced conditions,” said HAR Chair Jennifer Wauhob. “We saw years of unprecedented growth, and it appears the market is finally nearing pre-pandemic levels. Higher mortgage rates are softening buyer demand. But as prices level off and inventory grows, we’re going to see more consumers move from the sidelines to the marketplace.”

Inventory in Houston currently sits at a 2.8-month supply — the highest level of inventory since July 2020. Houston housing inventory trails behind national inventory levels, which are currently at a 3.2-month supply. Both levels are well under the ideal “balanced market” inventory of 6 months.