Home Sales
Home Sales increased month over month from April, which, despite the increase in interest rates, is in line with the seasonal trends of the summer season. Houston homes sold nearly matched the 2021 numbers showing a resilient market in Houston and prices have risen dramatically through the year and have topped out at a new high of $440,670, if you can believe it!
Why is this happening and what does this mean?
Despite interest rates rising, the combined effect of inflation and interest rates is still being passed onto a strong consumer as new homes continue to be bought at higher prices. While this may change throughout the year as the Federal Reserves’ fight in he boxing ring with inflation continues, the current market seems to be absorbing a lot of those costs.
Houston, being one of the country’s energy capitals, may also be benefitting abnormally across other major cities as rising gas prices and profits by oil and gas companies could be trickling down. While costly for individuals at the pump, it seems to be a boon to the Houston economy regardless.
Signs of Slowing Down, But Still Strong
Listings have begun to tick up to 1.6 months inventory, which matches in line with the previous reports we’ve submitted in our April 2022 Market Report & May 2022 Market Update and active listings sit at 24,301 as more sellers begin to put their homes on the marketplace in a “fear of missing out” moment. While this is a signal that we are moving towards a more balanced market, the total inventory is still low and is there is no sign that the price of homes will dramatically drop anytime soon. However, slowing prices should begin to take effect with the prices potentially dropping in the coming months due to inflation rising quicker than anticipated.
Single Family Homes are still the preferred option for buyers and have showed continued strength, even with higher interest rates. However, Townhomes have already begun to show weakness with Townhome prices dropping from $273,375 in April to $272, 381 in May, which may be an early sign of the price strength beginning to fade.
Monthly Costs and Interest Rates Increase
The affordability of homes is becoming increasingly thin as prices have continued to rise over the past few months alongside interest rates in the 5% range. Based on current average home prices and interest rates in the month of May, the total monthly payment for a home with 20% down is at $2,922 per month. These continued increases in total payments are a sign that there will be continued pressure on pushing prices lower in the coming year.
The Return of Buyer Incentives on New Homes
Another sign of the impact interest rates can have on the marketplace is tracking the demand of new home sales and builder confidence. New home sales in many of the countries’ major markets have shown significant weakness the past month or two compared to just a few months ago with homebuilders beginning to provide buyer incentives as the interest wanes on new builds. This will likely continue to be a factor in pushing prices further down as home builders begin to sell at discounts.
What it means going forward
As stated in our previous market updates, you will likely begin to see the effects of a slower market in the next coming months and into the fall of this year as prices begin to ease off and inventory continues to tick back up.
Need help understanding the market?
Interested in getting a professional opinion on what you should do with your properties? Reach out to us today at parceto.com or give us a call at (832) 324-5754 and we can consult with you on today’s best strategies, insights, and trends to help you outperform the market!
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.
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Online Information Sources:
Freddie Mac, “Mortgage Rates.” Freddiemac.com, 9 Jun 2022, https://www.freddiemac.com/pmms
Houston Association of Realtors, “MLS Press Release: Houston Housing Shows Stability in May Amid Churning Market Tides.” Har.com, 8 Jun 2022, https://www.har.com/content/mls/?m=06&y=22
Inman, “Sales declines, price drops and the return of buyer incentives: Oh my!” Inman.com, 9 Jun 2022, https://www.inman.com/2022/06/09/sales-declines-price-drops-and-the-return-of-buyer-incentives-oh-my/
Yahoo Finance, “Inflation hits 40-year high as CPI rises 8.6% in May” finance.yahoo.com, 10 Jun 2022, https://finance.yahoo.com/news/may-inflation-data-june-10-2022-212834308.html
