2023 should mark a return to ‘pre-pandemic normalcy’ for Houston real estate

After conquering the challenges of a global pandemic, Houston real estate found itself unable to withstand the powerful economic headwinds that began swirling in early 2022 and that ultimately ended a long and much-admired record-setting run. On top of limited affordable housing inventory, mortgage rates were perhaps the biggest culprit, rising throughout most of the year as the Federal Reserve drove a steady campaign of interest rate hikes to tame soaring inflation. The move prompted many consumers to postpone homebuying plans – in many cases pivoting to the rental market which thrived as a result. While mortgage rates have fallen steadily since surpassing seven percent last November, home sales continue to slow and will likely remain down through at least the early part of 2023. 

Single-family home sales for 2022 were down almost 11% compared to 2021’s record pace, marking the first year that Houston housing has been in the red since 2015. Despite the sales slowdown, prices rising to new highs in the $400,000s kept 2022’s total dollar volume close to last year’s record level.

According to HAR’s December/Full-Year 2022 Housing Market Update, single-family home sales fell about 11% to 95,113. Sales of all property types totaled 117,572, also down about 11% from 2021. Total dollar volume dropped just 1.5% to $39.3 billion versus $40 billion in 2021.

While this is disappointing news, it was no surprise that 2022 ended the way it did given the economic forces that affected the market during the latter half of the year, most notably inflation, mortgage rates and persistently low inventory. We have been in uncharted territory since the pandemic, but have generally held strong, and I anticipate the market returning to healthier levels later this year, especially with inventory levels improving, mortgage rates easing and prices moderating.

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