July Housing Report

Updates on the Houston Housing market in July 2022.

By: Peyton Poynter

July 22, 2022

Home Sales

June home sales & prices have started to turn in the opposite direction – a welcome sign for many would be buyers. The change is largely symbolic of the economic tightening happening, with the average home price in Houston lowering slightly off the peak in May from $440,670 to $436,425 in June, a 1% drop. With affordability at record lows (record high costs), the monthly cost to own the average home is about $3,000 dollars a month after putting 20% down. To put some numbers to it, the monthly payment (Principal, Interest, Taxes, and Insurance) on a $436,425 house at today’s 30 year fixed rate of 5.54% with 20% down would be about $2,959.97 per month*. This inevitably has pushed many would be buyers into the more affordable rental market. As a result, home sales have started to slow, listings have increased, and prices have begun to show weakness.

Inventories

The number of listings has risen dramatically from May to June with listings rising from 24,301 to 29,344 total listings, a 20.7% increase. While it’s not particularly unheard of for the number of listings to rise during the peak months, the increase in listings of nearly 5,000 in a one-month period, was larger than we’ve seen over the past two years.

Many sellers are trying to sell at peak value and the “rush” to sell their homes has increased supply from 1.6 months supply to 2 months supply in short order. For perspective, we haven’t seen a 2 months’ supply of homes since November 2020. We expect this trend will continue until the overall cost of owning a home re-aligns with the rental market.

Interest Rates & Inflation

With inflation and the federal reserve crowding out headlines, we’re sure you’ve heard enough about it over the past few months. Unfortunately, the real estate market and interest rates are in many ways directly correlated.

As interest rates continue to rise, prices should continue to steadily drop as more listings remain on the market and it becomes less affordable for buyers. In turn, consumers will flock to wherever they can best save on costs. The average rental on townhomes and single family homes currently sits around $2,000 and $2,300 respectively. So long as the cost of owning a home is drastically higher than renting one, we will likely see a lot more demand for rental properties than we will for purchasing.

As a silver lining, with the federal reserve getting more aggressive, interest rates will likely be front loaded and may peak this year. If that is the case, the market may snap back into shape fairly quickly and we could see the rates head back down in 2023.

What To Expect Going Forward

Renting is currently in vogue (and may stay that way for a while). Until rates, prices, and affordability come down closer to rental costs, you can expect the rental market to remain hot until affordability drops to closer in line with rental costs again – like it was in 2021. Rents will likely continue to rise and prices will continue to fall until those monthly payments pull closer together.

Listings will continue to rise throughout the remainder of the year. With continued high interest rates, prices should continue to flatten out and drop through the year.

*Assumes taxes are based on the value at the start of the year, when property values are appraised. The value was calculated using the average price in January for the Tax number of $377,738 at an approximately 2.5% tax rate – typical of the Houston, Tx Market. Also assumes annual insurance costs of around 0.5% of the market value.

The information and details contained herein have been obtained from third-party sources believed to be reliable, however, Parceto Real Estate has not independently verified its accuracy. Parceto Real Estate, it’s owners, stakeholders, and employees make no representations, guarantees, or express or implied warranties of any kind regarding the accuracy or completeness of information and details provided herein, including, but not limited to, the implied warranty of suitability and fitness for a particular purpose. Interested parties should perform their own due diligence regarding the accuracy of the information.

Any information provided herein, is being provided subject to errors, omissions, changes of price or conditions, and withdrawal without notice. Third-party data sources used in this article include: The Houston Association of Realtors and Freddie Mac. All content is provided on an “as is” basis, with no warranties of any kind whatsoever.

You should always consult with the assistance of an appropriate professional before making any decision. Opinions, estimates, forecasts, or other views contained in this document are those of Parceto Real Estate, and no information referenced in the article should be considered investment advice.

Online Information Sources:

Freddie Mac, “Mortgage Rates.” Freddiemac.com, 14 Jul 2022, https://www.freddiemac.com/pmms

Houston Association of Realtors, “As Houston Heats Up, The Housing Market Cools.” Har.com, 13 Jul 2022, https://www.har.com/content/mls/?m=07&y=22

Disclaimer

This Disclaimer (“Disclaimer”) sets forth important information regarding the information, examples, guides, research, or any other type of information provided by Parceto LLC dba Park Realty (“Company”, “Park Realty”, “Park”, “us”, “we”, and “our”) on www.parkrea.com (“Website”).

This research paper is prepared by and is the property of Park Realty and is circulated for information and educational purposes only. The views expressed herein are solely those of Park, its officers, or employees (whichever the case may be) as of the date of this paper was published. Park may or may have financial interests in one or more positions which the research papers provided herein may discuss.

There is no consideration given to specific investment objectives, needs, tolerances, or situations of any of the recipients. Additionally, our Website, research, insights, opinions, and examples should not be relied upon as legal or financial advice and we do not provide legal or financial advice in any capacity. If you have any specific considerations, you should consult with the appropriate qualified professional for advice regarding your specific situation.

This information is not directed or intended for distribution to or for the use by any person or entity located in any jurisdiction where such distribution, publication, availability, or use would be contrary to applicable law or regulation, or which would subject Park to any registration or licensing requirements within such jurisdiction.

We do not endorse, guarantee, or warrant the accuracy, completeness, or usefulness of any information or services provided on our Website. We make no representation or warranty, express or implied, regarding the quality or suitability of any real estate properties or related services featured on our Website.

While we consider the information we receive from external sources to be reliable, we do not assume any responsibility for its accuracy. Park research utilizes data from public, private, and internal sources. Our sources include Bloomberg Finance L.P., World Economic Forum, US Department of Commerce, National Association of Realtors (NAR), Texas Association of Realtors (TAR), Houston Association of Realtors (HAR), Bureau of Labor & Statistics, Freddie Mac, CoreLogic, Inc., Chatham Financial, but may also include others not listed in this Disclaimer.

We are not liable for any damages or losses arising from the use of our Website or from any real estate properties or related services featured on our Website. This includes, but is not limited to, direct, indirect, incidental, consequential, or punitive damages or losses.

Our Website may contain links to third-party websites that are not owned or controlled by us. We are not responsible for the content, privacy policies, or practices of any third-party websites. We encourage you to read the terms and conditions and privacy policies of any third-party websites that you visit.

We may revise and update this Disclaimer from time to time and at any time in our sole discretion. All changes are effective immediately when we post them on our Website. Your continued use of our Website following the posting of revised Disclaimer means that you accept and agree to the changes.

If you have any questions or comments about this Disclaimer, please contact us at [email protected]