Houston Real Estate Market MONTHS OF INVENTORY
PREDICTIONS FOR 2023 HOUSTON REAL ESTATE MARKET
During the weekend of November 12-14, I showed around 20 properties in the Briar Forest and Spring Branch areas to my client, a veteran real estate investor who is looking to buy his personal residence. He knows what he wants and is very good at spotting it. After all the showings, he and his wife narrowed the list down to four properties and let the rest of his family make the final decision. They all chose the same home.
Just after we got accepted our offer, I started to notice a slight drop in home values on most of the properties i showed. My client offered less than the asking price for a house, and it was already been reduced by more than 5% in the last 30 days. We determined that comparable properties were $50K to $70K less than this property was listed for. The offer was accepted and the option period process, inspections, etc. began.
What's interesting is that one week later, more than 10 houses, including one that made the final list, received a significant reduction in price. This one in particular got a 3% reduction, but I noticed that the average reduction in this list was around 6%.
This tells me that inventory is thriving and prices will continue to drop. Most of my colleagues suggest that this is happening due to the rise in mortgage rates (30-year fixed at 6.88% as of November 22, 2022). https://time.com/nextadvisor/mortgages/daily-rates/mortgage-rates-today-november-22-2022/. The past 10 months of data and analytics from the Houston Association of Realtors (HAR) provide a clear perspective on the housing market.”
Fig 1. in red, shows the average sale price since January until October 2022. You can spot a slight rise and drop in average sales prices being the peak at $440,670 in May.
Fig 2. in blue, indicates the amount of homes sold for the same period of time. I can spot a slightly abrupt up and down pattern, mainly caused by motivated sellers.
Fig 3. in yellow, demonstrates the months of inventory throughout the year. In my opinion, this is the most interesting chart because this points the trend of supply in the market. Trend that I think will continue for at least the 1st quarter of 2023.
You can see the average sale prices peak in figure 1 (red), which correlates with the number of houses sold in figure 2 (blue). The last factor to consider is the months of inventory, which in my opinion is the key factor, and this chart should act as a mirror to the other two (figure 3, yellow).
When you look at the three charts together fig 4, you can see a simple view of what's coming in the next few months. There is no sign of buyers backing down and the increasing inventory tells me that we're in a very healthy market and it is just undergoing a slight adjustment. As more data is released in the coming weeks and months, I will be able to close out the year and have a better picture for the first half of 2023.
After finishing writing this sentence, I reviewed the same search I conducted 15 days ago. I noticed that two of the properties that were previously listed had been removed from the market in the last three days. This could mean that the seller took them off the market for an unknown reason, or they may have made some changes to the property and will relist it with a different agent at a new, "improved price".