Housing

Houston homes sales end 2022 with a thud, market winning streak over

The average price of a home in Houston was $409,777 last month, up about 5% compared to December of 2021.

for sale sign
(AP Photo/Matt Rourke, File)
FILE – A “for sale” sign stands in front of a house in Pennsylvania, near Philadelphia, on June 8, 2018.

The winning streak for Houston's housing market has ended abruptly as local real estate experts look for better news in 2023.

A new report from Houston Association of Realtors shows home sales dropped nearly 11% in 2022, the first time the market has been in the red since 2015. A combination of factors led to the decline, including a sharp increase in mortgage rates earlier in the year and continued low inventory for potential homebuyers.

Despite the down year, Houston has avoided the housing nightmares seen last year in other parts of the country. In fact, home prices were mostly unchanged in 2022, down only slightly compared to 2021. The total dollar volume of all property types sold in Houston was down about 1.5% compared to 2021, to just under $40 billion.

"We didn't have those huge bubbles like some of the other parts of the west and the east did where they came down really hard," HAR Chair Cathy Trevino said. "Houston always has taken a gradual incline in sales prices and so I foresee it to go down the same way. It's going to gradually go down."

The average price of a home in Houston was $409,777 last month, up about 5% compared to December of 2021.

The year ended with its worst month for home sales. December sales were down nearly 33%, the ninth straight month home sales declined in Houston. Sales dropped in every price segment, including a 35% decrease in sales of homes priced at $1 million or more.

Inventory has been one of the key factors in the sales slump in Houston, although that number has improved slowly. Last month, there was a 2.7-month supply of available housing. During the pandemic, the supply was routinely below two months.

"The norm is six months of inventory and statistics state that anything less than six month of inventory is a seller's market and we've been in a seller's market for quite some time now," Trevino said.

Real estate experts have reminded buyers that even though mortgage rates are much higher than they were last year, they're still relatively affordable. Buyers got used to rates below 3% and are having a hard time accepting the current rates that are between 6-7%. Compare that to 1981, when mortgage rates were nearly 17%. Over the past 50 years, they have averaged over 7%.

"6% is actually pretty good when you look at the average over the past 50 years," Trevino said.

Home sellers still have more of the leverage in the current housing market, but that could slowly be changing. Home prices are expected to continue to edge down in Houston as sellers who have priced their homes unrealistically look to finally unload them.

"We're starting to see prices of homes normalize," Trevino said.

Experts say it could still be quite some time before the Houston market settles down after the roller-coaster of the past few years. Many potential homebuyers have chosen to wait things out, hoping mortgage rates will fall and homes in Houston will become more affordable.