By Cathy Treviño, chair, Houston Association of Realtors

After conquering the challenges of a global pandemic, Houston real estate found itself unable to withstand the powerful economic headwinds that began swirling in early 2022 and that ultimately ended a long and much-admired record-setting run. On top of limited affordable housing inventory, mortgage rates were perhaps the biggest culprit, rising throughout most of the year as the Federal Reserve drove a steady campaign of interest rate hikes to tame soaring inflation. The move prompted many consumers to postpone homebuying plans – in many cases pivoting to the rental market which thrived as a result. While mortgage rates have fallen steadily since surpassing seven percent last November, home sales continue to slow and will likely remain down through at least the early part of 2023. 

Single-family home sales for 2022 were down almost 11% compared to 2021’s record pace, marking the first year that Houston housing has been in the red since 2015. Despite the sales slowdown, prices rising to new highs in the $400,000s kept 2022’s total dollar volume close to last year’s record level.

According to HAR’s December/Full-Year 2022 Housing Market Update, single-family home sales fell about 11% to 95,113. Sales of all property types totaled 117,572, also down about 11% from 2021. Total dollar volume dropped just 1.5% to $39.3 billion versus $40 billion in 2021.

While this is disappointing news, it was no surprise that 2022 ended the way it did given the economic forces that affected the market during the latter half of the year, most notably inflation, mortgage rates and persistently low inventory. We have been in uncharted territory since the pandemic, but have generally held strong, and I anticipate the market returning to healthier levels later this year, especially with inventory levels improving, mortgage rates easing and prices moderating.

For the month of December, single-family home sales dropped 32.6 percent. That marks the ninth straight monthly and steepest, decline of 2022. Sales volume fell in all segments of the market, with the greatest drop, about 43%, among homes priced between $150,000 and $250,000. That was followed by the $1 million-and-above segment, which saw a 35% year-over-year decline.

The median price of a single-family home – the figure at which half of the homes sold for more and half sold for less – was $330,000 in December. That is the third straight month it has held at that level and is 3.8% higher than last December. The average price of $409,777 was up 5.1% compared to last year.

Single-family homes inventory grew from a 1.4-months supply to 2.7 months – the highest supply Houston has had in two years. For perspective, housing inventory across the U.S. currently stands at a 3.3-months supply, according to the latest National Association of Realtors report.

Sadly, I do not have tea leaves or a crystal ball at my disposal, but in talking to a few economists and looking at the data, the expectation is that Houston real estate in 2023 will continue in much the same fashion as it ended 2022. What that means is that the market is working its way back to pre-pandemic normalcy. Mortgage rates are already falling, housing inventory is slowly but steadily improving and home prices are moderating, so it’s my hope that we will see the market pick up momentum by mid-year. Buyers are already beginning to regain some leverage in a marketplace that has favored the seller for quite a while. In the meantime, would-be homebuyers continue to flock toward rental housing, which currently has sufficient supply to meet the growing demand.

As I write this, there is still speculation and debate about whether inflation is waning and if a recession is, in fact, looming or will only become a reality if – as many economists fear –we talk ourselves into one. Greater Houston Partnership (GHP) Chief Economist Patrick Jankowski, who says he’s lived through six recessions during his nearly 40 years at GHP, recently told us that if that happens, it will be “a short and shallow” recession.

The early part of the new year can actually be an excellent time to buy a home, as it is quieter, meaning less competition over homes on the market. Even if you don’t believe you’re in any position to buy a home right now, it’s still worthwhile to establish communication with a Realtor and lay the groundwork in terms of identifying the type of property that meets your needs and the neighborhood(s) where you would like to live.

HAR’s membership has grown to more than 50,000 since the pandemic, so there are plenty of Realtors out there for you if you don’t already have one. Check out the credentials and consumer reviews of these real estate professionals all day or night at HAR.com. Having a Realtor begin the home scouting process costs you nothing. Plus, you may be surprised to learn that, depending on your financial situation, it is possible that you qualify for down payment assistance or another form of financial support.

Here’s to a Happy and Healthy 2023!