Home Prices Hit Record High in Houston

HOUSTON – (By Michelle Leigh Smith, Realty News Report) – Houston home prices hit record highs in May with the average single-family price hitting $440,670, up about 14 percent over May of 2021, the Houston Association of Realtors reported.

The sales pace continued to be strong with the majority of buyers paid more than the initial listing price, HAR reported. The “Days on Market” statistic, measuring the actual time it took to sell a home, dropped from 35 to 29 days.

“If the property is priced correctly, often it will sell within the first week or two at asking price or greater, said Amy Bernstein, President of Bernstein Realty.

Bernstein sold a $4.75 million home in the heart of Bunker Hill Village in May, a six-year-old home, built by Frankel Custom Homes. It sits on a large cul-de-sac with a covered back patio and a gorgeous pool.

Amy Bernstein, Bernstein Realty of Houston

“We just put a home under contract in Hunter’s Creek for right under $6 million. We have listings all over the city in all price ranges and they are all selling very quickly. This past May was an incredibly busy month. We work with many buyers and sellers., those who live here locally and some who are relocating to Houston. Many of our buyer clients had been studying the market for a while and so they knew the market well, and felt comfortable when the right home came along,” Bernstein said. .“Understanding the market clearly is a big benefit when buyers often have to pay list price or greater due to the demand on the market. On the sales where we represented the sellers, we are very careful to price the home correctly without overpricing it. If the property is priced correctly, often it will sell within the first week or two at asking price or greater. For our listings that did not receive offers in the first 30 days, we review the pricing strategy with the seller and many times, make adjustments.”

The HAR reported 9,627 single-family homes were sold in May – the seventh best month in the history of Houston home selling. The May 2022 total was 87 homes fewer than the 9,714 homes sold in May of 2021.

“As a result of the fast-paced market conditions, the dynamic of selling homes right now is mind-boggling,” says Carla Curtis-Galyean, Realtor with RE/MAX Space Center. She had one of the top home sales in Houston’s top 10 for May, selling an 8,500 SF home listed at $4.2 million on Back Bay Court in Nassau Bay. The home is near the shores of Clear Lake and the Johnson Space Center.

While some Houston agents say they experienced an unusual number of potential deals that did not close, that’s not a trend across the board. “That’s OK if one deal doesn’t close, there are plenty of others in line,” says Cheri Fama, Sales Manager and Broker Associate at Compass Houston.

The inventory of homes for sale rose slightly, registering a 1.6-months supply compared to 1.3 months a year earlier. Increases in inventory have been rare in the last few years. But on historical basis, having and inventory of less than a 2-months supply has been a rarity than never occurred until December 2020. So the Houston housing market is still very much a sellers market. An inventory of a 6-months supply is a balanced market where neither buyers or sellers have an advantage.

“For me, May was good but I do know sales are slowing a bit,” says Paula Mason, an agent with Greenwood King. “This is true especially for $800,000 homes and above.”

Rising mortgage rates, which have been approaching 5.5 percent in some places and have escalated quickly in 2022 from around 3 percent at the beginning of the year.

“But it means that people who could afford a $450,000 home before are now having to look at $400,000. Inventory in that range is still very tight. Desirable neighborhoods like Heights, Garden Oaks, Spring Valley/Hilshire and Memorial Villages, followed by Montrose and River Oaks are still hot. But houses that are not updated or on busy streets or in flood zones are definitely sitting on the market longer,” Mason said.

Rising mortgage rates put home buying out of reach for some families. Would be buyers turn to rental housing or they find financial solutions like adjustable-rate mortgages.

Even though market conditions may be beginning to change, May was still aa very strong month for the Houston housing.

“For me, May was an excellent month for home sales,” says Cindy Cook, a Realtor with Beth Wolff Real Living. “Throughout the month, I experienced great response to properties that I had staged. Prior to staging, many buyers find it difficult to visualize the home. When they can see how a home looks lived in, they can see themselves there. I was able to get properties under contract and find rental properties, as well. The housing market has been tight, but we are seeing it begin to slow a bit with properties staying on the market a bit longer.”

“As the prices continue to rise and interest rates increasing, the summer will still be excellent, but we may not see homes fly off the market as they have done over the past year,” says Cook.

Home Ownership More Difficult

Patrick Jankowski, Vice President of Research for the Greater Houston Partnership, says, “Housing affordability in Houston has declined significantly over the past two years, according to a study recently released by the Houston Association of Realtors (HAR). Only 47 percent of households in metro Houston earned the minimum annual income ($73,400) required to purchase the median-priced Houston home ($330,800) in Q1/22. That’s down from 58 percent in Q1/21. Houston is not unique.

“All the state’s major metro areas saw similar declines over the past year,” says Jankowski. “Metro Austin has suffered the worst drop.”

This is not a recent phenomenon. The Texas metros that HAR studied have seen steady declines in affordability over the past 10 years. In the first quarter of 2012, 70 percent of Houston households qualified for the median-priced home, compared to only 47 percent today. For Austin, the share fell from 64 to 34 percent, in Dallas 72 to 47 percent, and San Antonio, 66 percent to 34 percent.

The Outlook

“Although the economy often remains a concern, with the stock market declining and interest rates rising, I still anticipate it will be a very active summer,” says Bernstein of Bernstein Realty. “I’ve seen several of the luxury homes that did not sell in the spring market come down in price recently and as a result, therefore, there may be some good opportunities for buyers.”

“Although interest rates have climbed since the beginning of the year, seeing rates in single digits is still a bonus for many of us whose first home was at 16 7/8 percent. When looking at the stock market, I think many will agree that in the long term, real estate is still a wise investment,” Bernstein says.

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