As we approach the end of 2024, it’s clear that this year’s Houston real estate market has been a rollercoaster ride. While we’ve seen periods of growth and stability, the market has also been subject to significant fluctuations, largely driven by rising mortgage rates, extreme weather events and record-high home prices. It’s been a year of challenges, but opportunities also emerged.

The American dream of homeownership has been tested by volatile mortgage rates. The year began with a surge in home sales, driven by pent-up demand and optimistic homebuyers who saw mortgage rates ease from 20-year highs in 2023. Rates have fluctuated between 6.08% and 7.22%, leaving some would-be buyers and sellers hesitant to make a move. Recently, rates leveled off after a six-week climb. National Association of REALTORS® Chief Economist Lawrence Yun believes mortgage rates will stabilize in 2025 and that 5.5%-6.5% could be the new norm. 

Soaring mortgage rates and home prices made it harder for many Americans to afford a home. In Houston, home prices hit a record high in May with an average sales price of $443,970, and home prices year to date remain 2% higher than in 2023.

The combination of elevated interest rates and high home prices has made it difficult for many to enter the market. Although the latest HAR data shows affordability improved slightly in the third quarter of 2024 for the first time in four years, the overall trend has been a gradual decline in purchasing power for many Houston-area households. This has forced many potential homebuyers to remain renters, and it has further fueled the rental market this year.

We saw an increasing number of potential homebuyers turning to new construction homes in the suburbs because they typically offer a more affordable housing option. As more buyers seek out value and convenience, I believe there will be further growth in the new home market in the months ahead.

A silver lining for buyers has been the expansion of housing inventory. After years of low supply, inventory levels have reached their highest level since 2012. We are seeing a more balanced market pace, benefiting both buyers with more options and sellers with sustained demand.

In October, the latest month for which HAR has compiled sales data, single-family home sales experienced the seventh increase in the past 12 months, climbing 13.8% year over year with a total of 7,185 units sold across the Greater Houston area versus 6,372 in 2023. The average price rose 5.2% to $423,166, while the median price rose 2.7% to $334,900.

Days on market, or the actual time it took to sell a home, increased from 48 to 51 days. Months of inventory of single-family homes expanded from a 3.5 months supply in October 2023 to 4.4 months. The current national supply stands at 4.3 months, as reported by NAR.

While I wish I had a crystal ball to show me the direction of the market, all indicators are that the Houston housing market will remain healthy through 2025. The trajectory of interest rates will continue to play a crucial role in shaping the market moving forward. Although economists predict that rates will remain elevated, they also anticipate a gradual decline in the long term. This could lead to increased buyer activity and renewed growth in the market.

Here’s to wishing all of you a wonderful holiday season and hoping for another year of growth for Houston housing in 2025.

Thomas Mouton is Chair of the Houston Association of Realtors.