The Houston housing market has certainly cooled since the height of the post-pandemic homebuying frenzy.
The Altos Research Market Action Index score for the Houston-Sugar Land-Baytown metro area fell from a 90-day average of 77 in late April 2022 to 38.88 as of late May 2024. While Altos considers a score above 30 to be a seller’s market, the nearly 40-point drop is significant. But local agents say a cooler market isn’t necessarily a bad thing.
“When it comes to housing, I think what kind of sums it up is, ‘Houston, we don’t have a problem,’” said Jemila Winsey, the CEO and principal broker of Houston-based ERA Legacy Living. “During the COVID market, when interest rates were like 2%, that wasn’t a normal market and the expectations that it would stay that way were unrealistic. I feel we are in a balanced market now, but things happen in waves and it will come back.”
Local real estate professionals say one major benefit of a slower housing market is a much-needed uptick in housing inventory. After plummeting to a 90-day average of 7,020 active single-family listings in May 2022 — an all-time low — the Houston metro area has rebounded. As of mid-May 2024, the 90-day average was 21,943 active single-family listings, about 4,000 listings below its May 2019 level.
“Inventory has really started to increase,” said Richard Garcia, a RE/MAX Signature II agent. “It has gone from two-and-a-half months of inventory a year ago in April 2023 to nearly four months of inventory this April.
“But in having conversations with sellers right now, it is still hard for many of them to want to give up that 3% interest rate for a 7% interest rate.”
Although local agents feel the market remains strong and is fairly balanced right now, they say it is clear that things have cooled down over the past two years. One thing that hasn’t changed, however, is the number of out-of-town buyers looking for a home in the Houston area.
“I’m seeing a lot of people moving here from other cities in Texas, as well as out of state,” Garcia said. “That is where a lot of my buyer leads are coming from right now.”
According to Shae Cottar, eXp Realty’s managing broker for Texas and the chair-elect of the Houston Association of Realtors, job opportunities are bringing many of these relocating buyers to the Houston area.
“I’m seeing a lot of new people in the area coming for the energy jobs and the tech jobs,” Cottar said. “There is a ton of construction going on right now in the energy sector, so a lot of folks are coming in for multiyear contracts, and some are choosing to rent, putting added stress on the rental markets. Others are buying.”
While agents have no doubts that the market has slowed, they said they are still seeing pockets with high levels of activity.
“I spoke with an agent two weeks ago who has 25 offers at an open house, which feels like we are back in 2020, but there are other areas where homes are staying on the market for 35, 40 or even 50 days, which is helping our inventory growth,” Cottar said.
Local real estate professionals said the majority of these market hot spots are in the suburbs.
“We are seeing a lot of homebuyers being drawn to suburban communities away from the heart of the city,” Cottar said. “This is due to a few different factors — one obviously being the further out from the city you get, the more affordability becomes less of a factor — but people want more space too.”
But while some properties in these suburban neighborhoods are seeing high levels of activity, local agents say mortgage rates continue to constrain buyers.
“Some homes are pretty stagnant and we are seeing days on market go up a bit because interest rates are preventing some people from buying right now,” Winsey said.
Altos data shows that the 90-day rolling average for median days on the market in the Houston metro area was 56 days in late May 2024. That was exactly the same as one year prior but up from a low point of 21 days set in the summer of 2022.
This buyer hesitancy, coupled with a strong new construction market, is keeping inventory levels in the suburban markets healthy despite the continued strong levels of demand.
In a portion of Montgomery County, which lies just north of the heart of Houston, Cottar said that 68% of home sales earlier this year came from new construction.
“Houston provides a good opportunity for builders because builders can use these infill lots, because we have a land bank here and we have a community land trust with the land bank,” Winsey added. “And the city works with these builders to build inventory at certain price points, which helps keep [homes] at affordable prices.”
As the temperatures continue to rise in the Houston area, local professionals expect housing market conditions to heat up as well.
“We had a pretty sluggish start to the year, but it really kind of rebounded in April,” Cottar said. “As always, there are people in transitions of all sorts, and people are always going to be looking for their first home, or downsizing or upsizing. The trends are there, even if it is a little bit cautious right now, but it is going to be a pretty healthy second half (of 2024).”
