Houston home sales stall as rising rates, limited inventory put a damper on hot market

Soaring home prices keeping some first-time buyers out of the market

HAR's Jennifer Wauhob (HAR, iStock / illustration by Ilya Hourie for The Real Deal)
HAR's Jennifer Wauhob (HAR, iStock / illustration by Ilya Hourie for The Real Deal)

Houston-area single-family home sales slowed in April from a year earlier, the first year-on-year decline since October, according to the Houston Association of Realtors.

A combination of record-high prices, rising interest rates, and limited inventory weighed on homebuyers during what would traditionally be the busy spring homebuying season, according to the report. Home sales declined 0.2 percent, with 9079 units compared with 9100 a year earlier.

“Contrary to what some people think, we do actually have new listings hitting the market, but they are selling exceptionally quickly and at some of the highest prices of all time as buyers and investors make cash offers well above the asking price to beat back their competition,” said HAR Chair Jennifer Wauhob, with Better Homes and Gardens Real Estate Gary Greene.

Sales soared during the pandemic, as they have in major cities across the country, as buyers sought more space to work at home, or greater comfort to quarantine.

In 2021, sales rose 10.3 percent from 2020 to 106,229, and 32 percent by total dollar volume, to $47 billion.

Homes priced between $500,000 and $1 million experienced the largest increase in sales in April, registering a gain of about 45 percent from a year earlier, followed by the luxury market, defined as properties for $1 million and up, which shot up 24.9 percent.

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At the low end of the market, those priced below $250,000, consumers were faced with limited inventory and rising borrowing costs as interest rates rise. They could stretch their finances for more expensive properties, or keep renting.

“Consumers have grown increasingly weary of the buying frenzy and many are considering postponing their purchasing plans because pricing and interest rates have exceeded their reach,’’ Wauhob said. “Unfortunately, we don’t anticipate conditions to improve anytime soon.’’

Prices rose to even higher levels in April after reaching record prices in March. The average price of a single-family home rose 14.9 percent to $426,061 while the median price jumped 16.6 percent to $343,990. Pricing for a single-family home in Houston surpassed $400,000 for the first time in March.

“The slight slowdown isn’t a bad thing, it’s good to have a little more inventory on the market,’’ Wauhob said. “Sales couldn’t keep increasing forever or we would be running out of homes to sell. It had to happen eventually.”

The association expects a slight increase in sales this year and recommends against waiting too long to buy, as prices continue to rise.

“There are still people who own those homes, and they’re acquiring equity,’’ Wauhob said. “Their homes have increased a lot in value too. So if you own a home right you’re in a good spot, regardless of the price.”