Despite the ongoing challenges posed by bloated mortgage rates, the Houston housing market shows resilience as it approaches the year-end with promising indicators. October witnessed the 19th consecutive month of negative home sales, reflecting the impact of the highest mortgage rates in two decades. However, amidst the decline, several positive trends emerged, as outlined in the Houston Association of Realtors’ (HAR) October 2023 Market Update.

Current Houston Housing Market Report

Market Highlights of the Month

October 2023 saw a 3.4 percent decline in single-family home sales across Greater Houston, marking the lowest monthly rate of decline throughout the year. The Houston Multiple Listing Service (MLS) recorded 6,377 units sold, compared to 6,603 in October 2022. Notably, the low and high ends of the market experienced positive sales activity, while homes priced between $150,000 and $1M saw modest declines of 4.3 to 8.5 percent.

Rental activity remained robust, with single-family homes and townhomes/condominiums showing strength. HAR's upcoming October 2023 Rental Home Update on November 15 will provide further insights into the rental market.

Housing inventory has steadily grown in recent months, contributing to moderated pricing. Single-family home prices exhibited a marginal increase, with the average price reaching $403,556 (up 0.4 percent), while the median price declined 0.9 percent to $327,000. These figures are notably lower than the record highs observed in May and June 2022.

October Monthly Market Comparison

October 2023 stands out as the 19th consecutive month of negative sales activity, with a 3.4 percent year-over-year decline in single-family home sales. This represents the smallest monthly volume decline of the year. Comparing to pre-pandemic October 2019, sales were down 11.3 percent, and against October 2018, sales decreased by 4.6 percent.

Total property sales and total dollar volume also fell below last year’s levels, with total dollar volume at $2.98 billion, down from $3.06 billion a year earlier. Single-family pending sales, however, rose by 11.0 percent. Active listings increased by 12.5 percent compared to 2022.

The months of inventory expanded to a 3.6-month supply in October, matching a level not seen since November 2019. Nationally, the housing inventory stands at a 3.4-month supply, according to the National Association of Realtors (NAR).

In conclusion, the Houston housing market navigates the challenges of high mortgage rates with resilience. As the year progresses, the interplay of factors such as housing inventory, pricing, and rental activity will continue to shape the real estate landscape.

Key Takeaways

• Continued Decline: October marks the 19th straight month of negative home sales in Greater Houston.
• Resilient Segments: Positive sales activity observed at both low and high ends of the market.
• Rental Strength: Robust rental activity persists in single-family homes and townhomes/condominiums.
• Moderating Prices: Single-family home prices show moderation, with average and median prices below record highs.
• Market Indicators: Despite declines, indicators like pending sales and increased inventory provide optimism for the market's future.

Single-Family Homes Update

In October, single-family home sales in the Greater Houston area declined by 3.4 percent year-over-year, with 6,377 units sold compared to 6,603 in the previous year. Pricing trends continue to ease after reaching record highs last spring. The average price in October rose by a fractional 0.4 percent to $403,556, while the median price fell by a fractional 0.9 percent to $327,000.

From a pre-pandemic perspective, October closings were 11.3 percent below October 2019's total of 7,187. Despite the decline, the median price in October 2023 of $327,000 is 36.3 percent above its 2019 level, and the current average price of $403,556 is 35.3 percent higher than it was then. Sales, however, remain 4.6 percent below the October 2018 level, when volume totaled 6,687.

The Days on Market (DOM) increased from 43 to 47 days, reflecting a slower pace in selling homes. The months of inventory registered a 3.6-month supply, up from 2.8 months a year earlier, marking the greatest months supply in four years. Nationally, the housing supply stands at 3.4 months, according to NAR.

Broken down by housing segment, October sales performed as follows:

• $1 – $99,999: Increased 12.7 percent
• $100,000 – $149,999: Increased 3.1 percent
• $150,000 – $249,999: Decreased 4.3 percent
• $250,000 – $499,999: Decreased 4.5 percent
• $500,000 – $999,999: Decreased 8.5 percent
• $1M and above: Increased 21.3 percent

HAR also provides sales figures for existing single-family homes. In October, existing home sales totaled 4,610, down 6.5 percent from the same month last year. The average price rose 3.0 percent to $406,277, and the median sales price rose a fractional 0.9 percent to $318,000.

Townhouse/Condominium Update

The townhouse and condominium market faced its 17th consecutive monthly decline in October, with sales volume falling by 16.4 percent year-over-year (453 closed sales versus 542 a year earlier). The average price edged up by 1.2 percent to $272,597, and the median price rose by 6.6 percent to $239,900. Inventory increased from a 2.0-month supply to 3.7 months, reaching the highest level since November 2020.

Compared to pre-pandemic October 2019, when 506 units were sold, townhome and condominium sales were down 10.5 percent. The average price back then was $198,865, and the median price was $164,500.

Houston Housing Market Forecast 2023-2024

The Houston-The Woodlands-Sugar Land housing market, as forecasted by Zillow, provides valuable insights into the current dynamics and future projections for the real estate landscape in the region. As of October 31, 2023, the average home value in the area stands at $301,555, reflecting a 1.2% decrease over the past year. Homes in this market typically go pending in approximately 22 days.

Market Statistics (Data through October 31, 2023)

• 1-year Market Forecast: -2.1% (October 31, 2023)
• For Sale Inventory: 23,349 (October 31, 2023)
• New Listings: 6,686 (October 31, 2023)
• Median Sale to List Ratio (September 30, 2023): 0.988
• Median Sale Price (September 30, 2023): $320,708
• Median List Price (October 31, 2023): $358,300
• Percent of Sales Over List Price (September 30, 2023): 21.0%
• Percent of Sales Under List Price (September 30, 2023): 58.6%
• Median Days to Pending (October 31, 2023): 22

The 1-year market forecast indicates a projected decrease of 2.1% by October 2024, suggesting a potential adjustment in home values. The significant inventory of 23,349 homes for sale as of October 31, 2023, and 6,686 new listings during the same period, contribute to a dynamic real estate landscape.

Key indicators such as the Median Sale to List Ratio, which stands at 0.988 as of September 30, 2023, provide insights into the competitiveness of the market. The Median Sale Price of $320,708 and the Median List Price of $358,300 offer a snapshot of the pricing trends in the region.

Examining buyer behavior, 21.0% of sales in September 2023 were recorded above the list price, while 58.6% were below the list price, indicating varied negotiation dynamics. The Median Days to Pending measure, at 22 days as of October 31, 2023, reflects the speed at which homes are going under contract in the current market.

Are Home Prices Dropping in Houston?

As of the most recent data available from Zillow (October 31, 2023), home prices in the Houston-The Woodlands-Sugar Land area have experienced a 1.2% decrease over the past year. This indicates a slight decline in home prices, suggesting a noteworthy trend in the market.

Is It a Buyer's or Seller's Housing Market?

The current housing market in the Houston region exhibits characteristics that may favor both buyers and sellers. With a 1-year market forecast indicating a -2.1% change, it could present opportunities for buyers looking for potential price adjustments. However, factors such as a median sale to list ratio of 0.988 and a median days to pending at 22 days (as of October 31, 2023) suggest a competitive environment, potentially favoring sellers. The balance between these factors indicates a nuanced market that can benefit both buyers and sellers depending on specific circumstances.

Will Houston Housing Market Crash?

While predicting market crashes is inherently challenging, the current data does not explicitly indicate an imminent housing market crash in the Houston area. The 1-year market forecast of -2.1% suggests a moderate adjustment rather than a drastic downturn. It is crucial to monitor various factors, including inventory levels, pricing trends, and economic conditions, to make informed assessments about the market's stability in the future.

Houston Rental Market Trends

The Zumper Houston Metro Area Report analyzed active listings last month across the metro cities to show the most and least expensive cities and cities with the fastest growing rents. The Texas one bedroom median rent was $1,141 last month. Sugar Land was the most expensive cities with one bedroom priced at $1,490. Huntsville was the most affordable city with rent at $750.

The Fastest Growing Cities For Rents in Houston Metro Area (Year-Over-Year)

• Huntsville had the fastest growing rent, up 25% since this time last year.
• Galveston saw rent climb 18.5%, making it second.
• Pearland was third with rent increasing 13.4%.

The Fastest Growing Cities For Rents in Houston Metro Area (Month-Over-Month)

• League City experienced the largest monthly rent price growth rate, jumping 6%.
• Conroe was second with rent climbing 3.5%.
• Sugar Land ranked as third with rent growing 2.1%.

As of November 2023, the average rent for a 1-bedroom apartment in Houston is currently $1,289. This is a 3% decrease compared to the previous year. Over the past month, the average rent for a studio apartment in Houston increased by 4% to $1,331. The average rent for a 1-bedroom apartment remained flat, and the average rent for a 2-bedroom apartment decreased by -1% to $1,587.

• Two-bedroom apartment rents average $1,587 (an 8% decrease from last year).
• Three-bedroom apartment rents average $1,900 (a 2% decrease from last year).
• Four-bedroom apartment rents average $2,050 (a 5% decrease from last year).

Some of the most affordable neighborhoods where the asking prices are below the average Houston rent:

• East Little York, where the average rent goes for $870/month.
• Greater Eastwood, where renters pay $850/mo on average.
• Gulfton, where the average rent goes for $1160/mo.

Houston Real Estate Investment Outlook

The city of Houston has long been a beacon for real estate investors seeking opportunities for long-term growth. As one of the largest and most dynamic cities in the United States, Houston offers a unique landscape for those looking to make strategic real estate investments. In this essay, we'll explore the factors that make Houston a promising destination for long-term real estate investment and provide insights into its outlook for sustainable growth.

Economic Resilience

One of the fundamental factors that underpin Houston's real estate investment potential is its economic resilience. Houston is home to a diverse range of industries, including energy, healthcare, manufacturing, and aerospace. Its role as the energy capital of the world has historically been a significant driver of economic activity.

While energy markets can be cyclical, Houston's economy has shown remarkable resilience even in the face of energy price fluctuations. This economic diversity serves as a stabilizing force for real estate investors, reducing the risk associated with economic downturns in any single sector.

Population Growth

Houston has consistently experienced population growth over the years. This demographic expansion is driven by several factors, including a robust job market, affordable housing, and a high quality of life. The city's attractiveness to both domestic and international migrants bodes well for long-term real estate investment. As the population continues to grow, the demand for housing and commercial properties is expected to follow suit, creating a reliable source of rental income and property appreciation for investors.

Infrastructure Development

Houston has made significant investments in infrastructure development. The city's commitment to improving transportation, public amenities, and urban planning has enhanced its livability and attractiveness. Infrastructure investments not only make the city a better place to live but also contribute to increasing property values. As Houston continues to expand and modernize its infrastructure, investors can expect to see a positive impact on their real estate holdings in the long term.

Real Estate Diversity

Houston's real estate market offers a diverse range of investment opportunities. Whether you're interested in residential, commercial, industrial, or mixed-use properties, Houston has options to suit various investment strategies. The city's size and varied neighborhoods provide investors with choices to tailor their portfolios to their specific goals. This diversity allows for risk mitigation through portfolio diversification, a key strategy for long-term real estate investors.

Top 10 Highest Appreciating Neighborhoods in Houston

1. Gulfgate Riverview Pine Valley East
2. Lawndale Wayside South
3. Downtown Southeast
4. Gulfton South
5. Second Ward East
6. Close In
7. Second Ward
8. Greenway Upper Kirby Area West
9. Second Ward West
10. South Main

(List by Neighborhoodscout.com)

Conclusion: Houston's Promise for Long-Term Real Estate Investment

When considering the outlook for long-term real estate investment, Houston stands out as a city with immense potential. Its economic resilience, population growth, infrastructure development, and real estate diversity create a fertile ground for investors seeking sustainable and reliable returns. The city's track record of weathering economic challenges and its proactive approach to urban development positions it as an attractive destination for those who value long-term real estate investments. As Houston continues to evolve and expand, it will likely remain a shining star in the constellation of real estate investment opportunities.

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References:

• https://www.har.com/content/mls
• https://www.zillow.com/houston-tx/home-values
• https://www.neighborhoodscout.com/tx/houston/real-estate
• https://www.realtor.com/realestateandhomes-search/Houston_TX/overview