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.<\/p>\n
Home prices, however, have remained relatively stable compared with a year ago.<\/p>\n
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.<\/p>\n
The number of homes sold, however, dropped 11.5%.<\/p>\n
The Houston area also had more than five months of housing inventory, while homes took nearly two months to sell.<\/p>\n
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.<\/p>\n
“What that is causing is a domino effect for everyone, for the entire economy,” McLaughlin said.<\/p>\n
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.<\/p>\n
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.<\/p>\n
“It means that it is going to cost more to borrow money,” he said.<\/p>\n
Even a relatively small change in a mortgage rate can affect a buyer’s monthly payment and total borrowing costs.<\/p>\n
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.<\/p>\n
For some buyers, the additional expense could determine whether they can afford a home.<\/p>\n
“To one, $60 may not be a big deal; to another, that may take them out of the market,” McLaughlin said.<\/p>\n
The changing market may also affect homeowners considering selling.<\/p>\n
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.<\/p>\n
“‘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.<\/p>\n
With sales declining and inventory rising, McLaughlin said it is difficult to characterize the Houston market strictly as favoring buyers or sellers.<\/p>\n
Although prices have remained stable, he said they could begin to decline if the current conditions continue.<\/p>\n
“I think that what you’re going to see, possibly, is the prices of homes coming down,” McLaughlin said.<\/p>\n
It remains unclear how long the current market conditions will last.<\/p>\n
McLaughlin said he expects the housing market and the broader economy to eventually adjust, although he acknowledged the challenges facing buyers and sellers.<\/p>\n
“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.”<\/p>\n