The Houston-area housing market is showing signs of a shift as home sales decline, inventory grows and properties take longer to sell. Higher interest rates are also increasing borrowing costs for prospective buyers.
Home prices, however, have remained relatively stable compared with a year ago.
According to the latest data from the Houston Association of Realtors, the median and average prices of single-family homes sold in August were essentially unchanged from the same period last year.
The number of homes sold, however, dropped 11.5%.
The Houston area also had more than five months of housing inventory, while homes took nearly two months to sell.
James McLaughlin, a real estate agent with HomeRock Realty who works near The Woodlands, said higher borrowing costs and changing market conditions could have ripple effects beyond the housing industry.
“What that is causing is a domino effect for everyone, for the entire economy,” McLaughlin said.
The Federal Reserve recently raised its benchmark interest rate by a quarter of a percentage point, putting additional pressure on borrowing costs. Another rate increase was also anticipated.
Although mortgage rates do not move in direct lockstep with the Fed’s benchmark rate, McLaughlin said higher rates generally make it more expensive to finance a home.
“It means that it is going to cost more to borrow money,” he said.
Even a relatively small change in a mortgage rate can affect a buyer’s monthly payment and total borrowing costs.
For a $400,000 home, a quarter-point increase in the mortgage rate could add roughly $60 to the monthly payment, depending on the loan amount, terms and other factors. Over a 30-year mortgage, that difference could total about $21,000.
For some buyers, the additional expense could determine whether they can afford a home.
“To one, $60 may not be a big deal; to another, that may take them out of the market,” McLaughlin said.
The changing market may also affect homeowners considering selling.
Some potential sellers may be reluctant to give up their current mortgage rate only to face a higher rate on their next home. They may also be concerned about finding another home that meets their needs.
“‘Well, if I sell my home, what am I going to find? Are there enough homes out there for me to purchase a home, and what is the interest rate?'” McLaughlin said.
With sales declining and inventory rising, McLaughlin said it is difficult to characterize the Houston market strictly as favoring buyers or sellers.
Although prices have remained stable, he said they could begin to decline if the current conditions continue.
“I think that what you’re going to see, possibly, is the prices of homes coming down,” McLaughlin said.
It remains unclear how long the current market conditions will last.
McLaughlin said he expects the housing market and the broader economy to eventually adjust, although he acknowledged the challenges facing buyers and sellers.
“I’m not going to say there’s not a challenge, because there is a challenge,” he said. “But again, I believe that we can get past that challenge.”
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