Houston home prices rose again in April even as fewer homes were sold amid tight inventories and rising mortgage rates.
Average home prices soared 14.9 percent in April to $426,061 – marking the second consecutive month that average prices surpassed the $400,000 mark, according to Houston Association of Realtors. Median home prices jumped nearly 17 percent over the year to $343,000, according to HAR.
The pace of home sales, however, slowed. Sales volume was essentially flat from a year ago — the first time in 2022 it has failed to surpass last year’s records, according to HAR. Pending sales, or homes coming under contract, stumbled by 1.2 percent in April compared to a year ago.
More sellers put their homes on the market in April, but strong demand is keeping inventories extremely tight at 1.4 months of supply— meaning it would take about a month and half to sell all the homes on the market at the current pace of sales. (A balanced market between sellers and buyers has 6 months of supply.) The average home is staying on the market for 33 days in Houston, compared to 40 days a year ago, according to HAR.
“Contrary to what some people think, we do actually have new listings hitting the market, but they are selling exceptionally quickly and at some of the highest prices of all time as buyers and investors make cash offers well above asking price to beat back their competition,” said Jennifer Wauhob. chair of the Houston Association of Realtors and an agent Better Homes and Gardens Real Estate Gary Greene.
On average, the majority of homebuyers are paying slightly above asking price, according to HAR, although some experts say bidding wars in certain neighborhoods are pushing sale prices significantly above asking prices.
Anne Park, Realtor associate with Douglas Elliman in Houston, said it’s common for buyers to pay 10 to 15 percent above asking price, particularly in hot markets such as Pearland, Sugar Land and Katy, where bidding wars are common.
“What I’m seeing is because interest rates are going up, they want to buy something right away,” Park said. “But the problem is because properties (in certain areas) have so many multiple offers they have to add more money to offer,”
Price growth is adding to an affordability crunch that is worsening because of rising mortgage rates. The average rate for a 30-year fixed mortgage is hovering around 5.27 percent – more than 2 percentage points higher than the 2.96 percent rate a year ago, according to Freddie Mac, the government-sponsored mortgage finance company. That could add roughly $435 to prospective buyer’s monthly payment (excluding insurance and taxes) assuming they take out a $320,000 loan.
Mortgage rates are relatively low compared to 1980s and 1990s, but after the historically low rates during the pandemic, the rapid increase is shocking would-be buyers.
“Typically, there is a newly-instilled sense of urgency to do something and so we usually see a bunch of people rush into the market as rates go up,” said Chance Brown, broker/owner at CB&A Realtors. which has 510 real estate agents in Texas. “And then you start to see a lull after the first initial wave.”
Brown said his agents still see bidding wars across Houston as demand stays strong. For example, a three-bedroom home in Tomball received 92 offers within 48 hours, Brown said.
But there some buyers, tired of getting outbid, are choosing to wait out the rapid price appreciation, Brown said. Other buyers are merely realigning expectations rather than forgoing purchases.
“People are getting priced out of from homes they could have afforded like four months ago now, and they have to look for less expensive houses elsewhere if they are on a tight budget,” said Seita Jongebloed, managing director at Compass in Houston.
In addition, Jongebloed noted, the rising costs could force would-be buyers to stay in rental market that is “on fire right now.”
Leasing volume among single-family rentals is up 17.2 percent with the average rents climbing 10.2 percent to $2,164, according to HAR. Median apartment rents in Houston rose 11.1 percent to $1,221 for a two-bedroom apartment, according to data from ApartmentList.com, an online apartment listing service.
Camden Property Trust, a Houston company that owns and manages about 58,000 apartment units nationwide, said last month that fewer of its tenants are moving out of its apartments after buying a home. it’s starting to see fewer move-outs for home purchases across its national apartment portfolio of 58,000 units. About 14 percent of tenants who moved out were relocating because of a home purchase in the first quarter, compared to about 17 percent of move-outs a year ago, according to Camden’s SEC filings.
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