Houston Home Prices Down, Less Affordable with High Rates

Affordability in home-buying continues to slip out of the hands of potential buyers in Texas.

Greater Houston faced a paradox in the second quarter: home prices showed signs of softening, yet the surge in interest rates significantly dampened affordability, according to the Houston Association of Realtors.

The median home price in the metro dipped by 2.5 percent to $348,300. However, that was overshadowed by high interest rates, which grew to 6.50 percent and drove up monthly mortgage payments. Average payments increased from $2,230 to $2,400.

The surge in interest rates is a blockade for some potential homebuyers, increasing the minimum annual household income necessary to purchase a home. It grew by nearly 8 percent to a high of $96,000, increasing more than any other Texas metro.

The Austin, Dallas-Fort Worth and San Antonio metros were notably less accessible for aspiring homeowners. The annual household income needed to buy a home at the median price increased 5 percent year-over-year in Dallas-Fort Worth to $107,200. In Austin, less income is needed, compared to this time last year. The minimum household income needed to afford a median-priced home fell 11 percent, from $156,200 in the second quarter of 2022 to $136,400 last quarter.

The income requirement increased 6.2 percent in Texas overall, with an annual household income of $95,600, up from $90,000 the year prior. However, the rate of affordability has remained largely unchanged, as 37 percent of households across the Lone Star State were able to afford median-priced homes in the second quarters of 2022 and 2023.

Home prices have soared in Greater Houston since the start of the pandemic.

The median home price has increased 40 percent compared to the second quarter of 2019, when it was $249,400. While 58 percent of Houston-area households were eligible to buy homes in the second quarter of 2019, the rate had dwindled to 39 percent by 2023 with no signs of reversal.