The Houston housing market is experiencing a resurgence as we head into 2024. With improving sales, diverse market segments performing well, and favorable conditions for buyers, the Houston real estate landscape appears poised for a promising start in the upcoming year.
How is the Houston housing market doing currently?
According to the Houston Association of Realtors’ (HAR) November 2023 Market Update, single-family home sales across Greater Houston rose by a notable 4.9 percent, marking the first increase since March 2022. The Houston Multiple Listing Service (MLS) recorded sales of 6,154 units compared to 5,864 in November 2022. The months' supply of homes climbed from 2.8 to 3.5. However, when compared to pre-pandemic November 2019, home sales were down 3.2 percent, totaling 6,359 units.
The market showed resilience as only homes priced below $150,000 experienced declines, comprising just 3.5 percent of the overall market. On the positive side, homes priced between $250,000 and $500,000, the largest segment at 59.8 percent, rose by a significant 8.0 percent year-over-year. The report also highlighted the strength in the rental market for single-family homes and townhomes/condominiums.
Optimistic Outlook
“I couldn’t think of a better way to wrap up 2023 than to see positive sales trends after nearly two years of negative trending,” said HAR Chair Cathy Treviño with LPT, Realty. She emphasized the crucial role of interest rates in driving home sales and expressed hope that consumer confidence would be restored in the new year, especially with improving inventory and moderated prices, creating favorable conditions for buyers.
Price Movements
The average price of a single-family home throughout Greater Houston edged up by 1.0 percent to $404,597, while the median price notched downward by 1.2 percent to $326,000. These figures are noteworthy as they are well below the record highs of $438,350 (average) in May 2022 and $354,000 (median) in June 2022.
November Monthly Market Comparison
November marked a significant turning point, being the first time in 19 months that single-family home sales were in positive territory, with sales rising by 4.9 percent year-over-year. Comparisons to pre-pandemic November 2019 showed a 3.2 percent decline, while against the sales volume in November 2018, sales were statistically flat.
In addition to the increase in single-family sales volume, total property sales rose by 3.7 percent, and total dollar volume climbed by 7.5 percent, reaching $2.9 billion from $2.7 billion. Single-family pending sales rose by a noteworthy 11.9 percent. Active listings, or the total number of available properties, were 13.5 percent ahead of the 2022 level.
Months of inventory expanded from a 2.8-month supply last November to 3.5 months, matching its October 2023 level. This represents the greatest supply of homes since November 2019. On a national scale, housing inventory stands at a 3.6-month supply, according to the latest report from the National Association of Realtors (NAR), with a 4.0- to 6.0-month supply generally considered a “balanced market” in which neither buyer nor seller has an advantage.
Houston Single-Family Homes Overview
In November 2023, the Houston housing market witnessed a significant turnaround in the single-family home segment, experiencing the first increase in 19 months. The positive momentum was reflected in a 4.9 percent year-over-year increase, with a total of 6,154 units sold across the Greater Houston area, compared to 5,864 in 2022.
Pricing trends continued to moderate, marking a departure from the spike observed in the spring of 2022. The average price of a single-family home rose by 1.0 percent to $404,597, while the median price fell by 1.2 percent to $326,000.
For a pre-pandemic perspective, November closings were 3.2 percent below the November 2019 total of 6,359. Interestingly, the November 2023 median price of $326,000 is 35.3 percent above its 2019 level ($241,000), and the current average price of $404,597 is 36.2 percent higher than it was back then ($297,070). Sales, however, remain statistically unchanged from where they were five years ago in November 2018 when volume totaled 6,170, with a median price of $235,000 and an average price of $294,583.
Days on Market, representing the actual time it took to sell a home, eased slightly from 48 to 47 days. Months of inventory registered a 3.5-month supply for the second consecutive month, compared to 2.8 months a year earlier. This marks the greatest months supply in four years. The current national supply stands at 3.6 months, as reported by NAR.
Breaking down November sales by housing segment provides insights into specific market dynamics:
- $1 - $99,999: Decreased by 19.4 percent
- $100,000 - $149,999: Decreased by 9.4 percent
- $150,000 - $249,999: Increased by 3.6 percent
- $250,000 - $499,999: Increased by 8.0 percent
- $500,000 - $999,999: Increased by 4.1 percent
- $1M and above: Increased by 4.1 percent
HAR also provides specific figures for existing single-family homes. In November, existing home sales totaled 3,958, representing a 4.4 percent decrease from the same month last year. Despite the decline in sales volume, the average price rose by 3.7 percent to $409,934, and the median sales price rose by 3.2 percent to $320,000.
Houston Townhouse/Condominium Market Trends
In contrast to the positive trends observed in the single-family home market, November brought about continued challenges for the townhouse and condominium segment, which experienced its 18th consecutive monthly decline. Sales volume fell 3.0 percent year-over-year, with 425 closed sales compared to 438 a year earlier. Despite the decline, it is worth noting that this represents the smallest rate of decline since the slump began in June 2022, hinting at the possibility of a future rebound.
The average price of townhomes and condominiums in November rose 7.3 percent to $272,382, and the median price witnessed a more substantial 11.4 percent jump to $245,000. These price movements indicate a market that, despite the decline in sales, is witnessing appreciation in property values.
The inventory for townhomes and condominiums expanded from a 2.1-months supply to 3.7 months, reaching the highest level since November 2020. This increase in inventory suggests a potential shift in the market dynamics, offering buyers more choices and potentially contributing to a stabilization in prices.
When comparing the current state of the market to pre-pandemic November 2019, when 470 units sold, townhome and condominium sales were down 9.6 percent. The average price during that period was $218,618, and the median price was $170,000. These figures provide context to the current market conditions, highlighting both challenges and areas of potential improvement.
Houston Housing Market Forecast 2023-2024
As of November 30, 2023, the Houston-The Woodlands-Sugar Land housing market is undergoing notable shifts, with insights derived from Zillow providing valuable information for both buyers and sellers. Here's a detailed breakdown of the latest housing data:
Current Market Snapshot
- Average Home Value: $300,667
- Change Over the Past Year: Down 1.1%
- Days to Pending: Around 25 days
Market Forecast (One-Year Projection)
- 1-Year Market Forecast (Nov 30, 2023): -2.0%
Inventory and Listings
- For Sale Inventory (Nov 30, 2023): 23,047
- New Listings (Nov 30, 2023): 6,010
Sale and List Prices
- Median Sale to List Ratio (Oct 31, 2023): 0.986
- Median Sale Price (Oct 31, 2023): $319,333
- Median List Price (Nov 30, 2023): $355,283
Sales Trends
- Percent of Sales Over List Price (Oct 31, 2023): 18.9%
- Percent of Sales Under List Price (Oct 31, 2023): 60.7%
Is Houston a Buyer's or Seller's Housing Market?
Given the data, the Houston housing market appears to be favoring buyers. The 1-year market forecast indicates a -2.0% decline, suggesting a potential buyer-friendly environment in the coming months. With home prices experiencing a decline, a buyer-friendly market forecast, and a substantial percentage of sales under list price, it may be considered a good time for prospective buyers to explore the Houston housing market.
Are Home Prices Dropping in Houston?
Yes, the average home value has experienced a 1.1% decrease over the past year, contributing to a market where prices may be more favorable for potential buyers. The data does not suggest an impending market crash. However, the decline in home values and the negative market forecast highlight a period of adjustment and moderation rather than a crash.
Source: Zillow
Houston Rental Market Trends
The Zumper Houston Metro Area Report analyzed active listings last month across the metro cities to show the most and least expensive cities and cities with the fastest-growing rents. The Texas one-bedroom median rent was $1,136 last month. Sugar Land was the most expensive city with one bedroom priced at $1,400. Huntsville was the most affordable city with rent at $730.
The Fastest Growing Cities For Rents in Houston Metro Area (Year-Over-Year)
- Huntsville had the fastest-growing rent, up 12.3% since this time last year.
- Pasadena saw rent climb 8.4%, making it second.
- Galveston was third with rent increasing 2.9%.
The Fastest Growing Cities For Rents in Houston Metro Area (Month-Over-Month)
- Huntsville experienced the largest monthly rent price growth rate, growing 5.8%.
- Galveston was second with rent climbing 4.9%.
- Pasadena ranked as third with rent increasing 2.3%.
Credits: Zumper
Houston Real Estate Investment Outlook
The city of Houston has long been a beacon for real estate investors seeking opportunities for long-term growth. As one of the largest and most dynamic cities in the United States, Houston offers a unique landscape for those looking to make strategic real estate investments. In this essay, we'll explore the factors that make Houston a promising destination for long-term real estate investment and provide insights into its outlook for sustainable growth.
Economic Resilience
One of the fundamental factors that underpin Houston's real estate investment potential is its economic resilience. Houston is home to a diverse range of industries, including energy, healthcare, manufacturing, and aerospace. Its role as the energy capital of the world has historically been a significant driver of economic activity.
While energy markets can be cyclical, Houston's economy has shown remarkable resilience even in the face of energy price fluctuations. This economic diversity serves as a stabilizing force for real estate investors, reducing the risk associated with economic downturns in any single sector.
Population Growth
Houston has consistently experienced population growth over the years. This demographic expansion is driven by several factors, including a robust job market, affordable housing, and a high quality of life. The city's attractiveness to both domestic and international migrants bodes well for long-term real estate investment. As the population continues to grow, the demand for housing and commercial properties is expected to follow suit, creating a reliable source of rental income and property appreciation for investors.
Infrastructure Development
Houston has made significant investments in infrastructure development. The city's commitment to improving transportation, public amenities, and urban planning has enhanced its livability and attractiveness. Infrastructure investments not only make the city a better place to live but also contribute to increasing property values. As Houston continues to expand and modernize its infrastructure, investors can expect to see a positive impact on their real estate holdings in the long term.
Real Estate Diversity
Houston's real estate market offers a diverse range of investment opportunities. Whether you're interested in residential, commercial, industrial, or mixed-use properties, Houston has options to suit various investment strategies. The city's size and varied neighborhoods provide investors with choices to tailor their portfolios to their specific goals. This diversity allows for risk mitigation through portfolio diversification, a key strategy for long-term real estate investors.
Top 10 Highest Appreciating Neighborhoods in Houston
- Gulfgate Riverview Pine Valley East
- Lawndale Wayside South
- Downtown Southeast
- Gulfton South
- Second Ward East
- Close In
- Second Ward
- Greenway Upper Kirby Area West
- Second Ward West
- South Main
(List by Neighborhoodscout.com)
Conclusion: Houston's Promise for Long-Term Real Estate Investment
When considering the outlook for long-term real estate investment, Houston stands out as a city with immense potential. Its economic resilience, population growth, infrastructure development, and real estate diversity create a fertile ground for investors seeking sustainable and reliable returns. The city's track record of weathering economic challenges and its proactive approach to urban development positions it as an attractive destination for those who value long-term real estate investments. As Houston continues to evolve and expand, it will likely remain a shining star in the constellation of real estate investment opportunities.
References:
- HAR Market Update: https://www.har.com/content/mls
- Zillow: https://www.zillow.com/houston-tx/home-values
- Neighborhoodscout.com: https://www.neighborhoodscout.com/tx/houston/real-estate
- Realtor.com: https://www.realtor.com/realestateandhomes-search/Houston_TX/overview
