Affordability declines in Houston resi market

Despite home prices moderating in Greater Houston, housing affordability remained on the decline in the first quarter of 2023. 

The percentage of home buyers who could afford the median-priced home in the Bayou City decreased five points from 47 percent in the first quarter of 2022 to 42 percent in the first three months of this year, according to HAR’s Housing Affordability Index. Increasing borrowing costs are making it a challenge for many Houstonians to afford the median price, which declined 1.1 percent to $327,000 in the first quarter of this year. 

The monthly mortgage payment on a 30-year, fixed-rate loan, including taxes and insurance, rose from $1,840 a year ago to an average of $2,230 this year, due to increased interest rates. As a result, Houston-area households needed to earn about 21 percent more income annually than they did a year ago to afford a median-priced home. While a household earning $73,600 a year in 2022 could purchase a median-priced home, now nearly $90,000 a year would be required to afford the same. 

Home prices in the Houston area have increased considerably compared to 2019 when the median home price was $235,900, the report shows. Median home prices are roughly 39 percent above where they were pre-pandemic as wage growth has begun decelerating.  

The trend is also showing statewide, according to HAR’s index. Last year, 45 percent of Texans could afford a median-priced home of $329,000. Today, it has decreased to a low of 40 percent of Texans being able to afford a home priced at the $330,000 statewide median. 

Houston’s Memorial Villages, River Oaks and West University Place were the least affordable single-family areas with only 3 percent of Harris County residents being able to afford the prices. Meanwhile, Pasadena was the most affordable with 50 percent of residents meeting income requirements for a median-priced home. 

Despite declining home affordability, there’s a glimmer of hope in Houston’s rental market. Lease prices for single-family homes increased by only $50 year-over-year making rental properties a hot commodity for those priced out of home buying. The median single-family lease price increased from $1,900 in 2022 to $1,950 in the first quarter of 2023. Rental affordability increased from 46 percent last year to 48 percent in 2023 amid a 3.5 percent rise in compensation costs for Houstonians year-over-year, according to the Bureau of Labor Statistics.