Thirty-eight percent of Houston-area households could afford to purchase a median-priced home during the fourth quarter of 2023, according to the Housing Affordability Index from the Houston Association of REALTORS® (HAR). That’s up from 35% in the third quarter, but down from 40% in the fourth quarter of 2022.

The median home price in Houston declined 0.4% to $336,000 during the fourth quarter, while the monthly mortgage payment rose to $2,460, up from $2,350 a year ago. Meanwhile, the average interest rate hit a 20-year high of 7.3%, up from 6.6% during the same time in 2022. That means Houston households needed 4.7% more income annually to afford a median-priced home.

“Elevated mortgage rates created challenges for prospective homebuyers throughout 2023, and this prompted many consumers to postpone their homebuying plans and turn to the rental market,” HAR Chair Thomas Mouton said in the report. “As home prices moderate and interest rates ease, we anticipate more favorable market conditions for homebuyers throughout 2024.”

As the rental market became more and more popular throughout 2023, single-family lease prices also increased: across the Houston metro area, monthly lease prices increased to $2,000, up 2.6% year over year. The highest increase was seen in Galveston County, where the median lease price rose 7.8% to $1,995. Households in the Houston area needed an annual income of $80,000 to afford a median lease payment last quarter — and that doesn’t include extra costs like utilities or security deposits.

However, Houston affordability was slightly better than that of the rest of Texas: only 36% of Texas households could afford a median-priced home in the fourth quarter, down from 38% in the fourth quarter of 2022. Statewide, the median home price was $334,166, meaning the typical household would need an annual income of $97,600 to be able to afford mortgage payments.