For the second consecutive year, nationwide economic factors disrupted the Houston housing market. While 2023 witnessed substantial growth in housing inventory and a moderation in pricing, it was primarily the spike in mortgage interest rates, reaching a 20-year peak, that prompted numerous potential buyers to either abandon their purchase plans or shift towards rental housing during 2023. As 2024 commences, Houston's residential housing landscape appears robust, notwithstanding the uncertainties surrounding potential actions by the Federal Reserve concerning interest rates and persistent consumer concerns regarding inflation.
A dip in single-family home sales and overall property sales marked 2023 as the second consecutive year of decline for the Houston housing market. According to the December/Full-Year 2023 Housing Market Update from HAR, single-family home sales witnessed a 12.0 percent drop, totaling 83,854. All property types' sales amounted to 102,367, reflecting a 13.1 percent decrease from 2022. The total dollar volume witnessed a 12.6 percent decrease, dropping to $40 billion compared to $45.6 billion in 2022.
Thomas Mouton, HAR Chair from Century 21 Exclusive, commented, "Experiencing a decline in home sales is disheartening, but it's crucial to acknowledge that the economic forces affecting Houston were pervasive across the U.S. This was not an isolated situation for Houston. We anticipate a resurgence in home sales once consumer confidence is restored, contingent upon the Federal Reserve's decisions on interest rates and evidence indicating a lack of inflation threat. The increased housing inventory and stabilized pricing observed throughout 2023 create an optimistic backdrop for homebuying in 2024."
In December, single-family home sales saw a 6.2 percent year-over-year decline. This followed November's 4.7 percent increase, marking the first upward trend in sales in 19 months. While various segments of the housing market experienced declines, the segment with the highest volume, encompassing homes priced between $250,000 and $500,000, remained unchanged compared to December 2022. Homes priced at $1 million and above witnessed a 2.1 percent decline.
The median price of a single-family home, standing at $330,000 in December, remained unchanged from the previous year. Similarly, the average price, at $407,817, showed no significant statistical variation.
Annual Market Review for 2023
Throughout 2023, rising mortgage rates posed a significant impediment to homebuying, leading some consumers to abandon plans to purchase homes and prompting many others to opt for renting. The Houston real estate market began the year with double-digit declines in sales volume, gradually easing by spring. The combination of slower sales and a consistent influx of new listings allowed inventory to grow, eventually reaching levels comparable to the healthier market conditions of 2019 and 2020. By October, as the Federal Reserve continued efforts to combat inflation, mortgage rates climbed to levels unseen in two decades, exceeding 8 percent. Despite this, and just in time for the holidays, home sales saw a 4.7 percent increase in November – the first positive movement the market had experienced in 19 months, though insufficient to avert 2023 from being the second consecutive year of decline.
At the beginning of 2023, the inventory stood at a 2.6-month supply. By October and November, it had expanded to a 3.5-month supply, reaching the highest level since November 2019 when the market had a 3.6-month supply. In December, the inventory registered a 3.3-month supply. Traditionally, a 4.0- to 6.0-month supply is considered a "balanced market," where neither buyer nor seller holds a distinct advantage.
June recorded the highest sales volume of the year, with 8,723 single-family units sold during the month. By the end of December, the total single-family homes sold in greater Houston in 2023 amounted to 83,854, marking a 12.0 percent decrease from the 95,302 homes sold in 2022.
On a year-to-date basis, the average single-family home price remained statistically steady at $412,161, while the median price saw a 2.5 percent decline to $330,000. The total dollar volume for the full year 2023 experienced a 12.6 percent decrease, amounting to about $40 billion.
Houston's rental market thrived in 2023 as potential buyers opted for renting homes until they perceived stability or declines in mortgage interest rates and were assured that inflation was no longer a concern. HAR will present a report on rental trends in the December 2023 Rental Market Update, scheduled for release on Wednesday, January 17.
December Monthly Market Overview
The Houston housing market displayed a mix of outcomes in December. Single-family home sales, total property sales, and total dollar volume witnessed declines compared to December 2022, while pricing remained statistically consistent. The month-end pending sales for single-family homes reached 5,723, reflecting a notable 14.5 percent increase from the previous year. Total active listings, indicating the overall available properties, rose by 13.9 percent to 38,028.
The inventory for single-family homes expanded from a 2.6-months supply to 3.3 months. For context, the current housing inventory across the U.S. stands at a 3.5-months supply, according to the latest report from the National Association of Realtors (NAR).
December Single-Family Homes Update
In December, single-family home sales amounted to 6,103, marking a 6.2 percent decrease from December 2022. This followed the unexpected 4.7 percent increase in sales volume observed in November, representing the first positive sales trend in 19 months. The median price remained unchanged at $330,000, and the average price was statistically flat at $407,817. These figures conclude a year characterized by gradual yet consistent moderation in home prices. The Days on Market (DOM), indicating the average time it took for a home to sell, decreased from 57 to 56 days.
Broken down by housing segment, December sales performed as follows:
HAR also provides separate sales figures for existing single-family homes. Existing home sales totaled 3,928 in December, reflecting a 6.6 percent decrease compared to the same month last year. The average sales price remained unchanged at $399,841, while the median sales price slightly increased by 1.6 percent to $315,000.
Townhouse/Condominium Update
Throughout 2023, townhome and condominium sales experienced a decline, although the rate of decline slowed during the final two months of the year. In December, volume fell by 7.0 percent, with 411 units sold compared to 442 units in the previous year. The average price increased by 6.7 percent in December to $258,137, and the median price rose by 9.3 percent to $235,000. Inventory improved from a 2.0-months supply to 3.5 months.
Houston Real Estate Highlights for December and Full-Year 2023