For the second year in a row, housing inventory, interest rates, inflation and economic uncertainty caused disruption to the Houston area housing market. In 2023, we saw housing inventory grow, single-family home prices remain flat and interest rates jump to 20-year highs. The rising interest rates proved to be a deterrent for buyers.
The Houston housing market faced another turbulent year in 2023 as rising interest rates and economic uncertainty deterred buyers for the second consecutive year. Single-family home sales dropped 12% while total property sales fell 13.1% compared to 2022, signaling disruption across the market. December brought a 6.2% year-over-year decline in single-family home sales, capping off a slow end to the year.
After starting 2023 with just 2.6 months of inventory, the supply of single-family homes swelled to 3.5 months in October and November – the highest level since November 2019’s 3.6 months. By December, inventory settled at 3.3 months, on par with the 3.5-month national supply according to the National Association of Realtors. With growing inventory, days on market also increased, ranging from 42-63 days in 2023.
While single-family home prices remained relatively flat in 2023, the sharp rise in interest rates proved deterrent enough to stall the market. Hopefully, 2024 will bring more economic certainty and consumer confidence.
The Texas A&M Real Estate Research Center Forecast is included below. For reference, 2022 end-of-year data can be found here.
Per HAR / MLS:
| Category | Jan. 2023 | Feb. 2023 | Mar. 2023 | Apr. 2023 | May 2023 | June 2023 | July 2023 | Aug. 2023 | Sept. 2023 | Oct. 2023 | Nov. 2023 | Dec. 2023 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total Property Sales | 5,650 | 6,981 | 9,589 | 8,912 | 10,476 | 10,382 | 9,223 | 9,780 | 8,550 | 7,825 | 7,472 | 7,395 |
| Total Active Listings | 33,606 | 33,109 | 33,442 | 33,203 | 33,919 | 36,431 | 37,079 | 38,439 | 39,632 | 40,630 | 40,724 | 38,028 |
| Single-Family Home Sales | 4,549 | 5,723 | 7,907 | 7,310 | 8,637 | 8,582 | 7,557 | 7,983 | 6,886 | 6,377 | 6,154 | 6,103 |
| Townhome/Condominium Sales | 352 | 441 | 552 | 577 | 670 | 687 | 645 | 610 | 552 | 497 | 463 | 435 |
| Single-Family Months of Inventory | 2.7 | 2.6 | 2.7 | 2.7 | 2.8 | 3.1 | 3.2 | 3.3 | 3.5 | 3.6 | 3.5 | 3.3 |
| Single-Family Pending Sales | 7,167 | 7,546 | 9,043 | 8,988 | 9,146 | 8,634 | 8,447 | 7,842 | 6,676 | 6,669 | 6,069 | 5,723 |
| Days on Market | 59 | 63 | 62 | 55 | 48 | 45 | 42 | 42 | 45 | 47 | 47 | 56 |
| Price Range | Jan. 2023 | Feb. 2023 | Mar. 2023 | Apr. 2023 | May 2023 | June 2023 | July 2023 | Aug. 2023 | Sept. 2023 | Oct. 2023 | Nov. 2023 | Dec. 2023 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| $1 - $99,999 | 25 | 20 | 44 | 22 | 29 | 29 | 35 | 24 | 26 | 24 | 28 | 37 |
| $100,000 - $149,999 | 78 | 89 | 104 | 88 | 97 | 106 | 94 | 112 | 111 | 93 | 79 | 83 |
| $150,000 - $249,999 | 766 | 916 | 1,125 | 998 | 1,072 | 1,007 | 891 | 1,053 | 892 | 909 | 872 | 797 |
| $250,000 - $499,999 | 2,179 | 2,488 | 3,788 | 3,514 | 4,150 | 4,175 | 3,667 | 3,851 | 3,265 | 3,089 | 3,078 | 3,055 |
| $500,000 - $749,999 | 436 | 554 | 851 | 830 | 1,044 | 1,058 | 908 | 921 | 773 | 639 | 648 | 640 |
| $750,000 and above | 220 | 276 | 466 | 492 | 634 | 654 | 544 | 539 | 431 | 386 | 352 | 346 |
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The Texas A&M University Texas Real Estate Research Center (TRERC) published their 2024 Texas Real Estate Forecast on January 4th. This informed real estate forecast is intended to help Texans to make better real estate decisions. Per TRERC, “Texas is a real estate trendsetter when it comes to residential, commercial, and land markets in the U.S. In fact, four Texas housing markets—DFW, Houston, Austin, and San Antonio—outranked every U.S. real estate market in 2023.” Hopefully, this continues through 2024 and beyond.
Residential
Single-Family Housing
Single-family deliveries will increase in 2024 relative to 2023. With almost 4 percent growth over last year, construction will match pre-COVID levels.
Prices
At best, average overall home price levels could remain flat or, at most, dip slightly.
Rent
Single-family rents are expected to fall, continuing their 2023 trend.
Sales
Home sales have not bottomed out, and total sales are expected to remain flat in 2024 compared to 2023, at about 330,000 units. Lower interest rates for at least part of 2024 may boost this somewhat. New sales will continue to account for a larger-than-average share of total sales—around 20 percent.
Multifamily Housing
Apartment deliveries will be much lower in 2024 than in 2023 as the under-construction pipeline has peaked. Statewide deliveries will be 20 percent lower by year end.
Rent
Multifamily effective rent growth will strengthen in 2024. Growth in the largest metropolitan markets will average 2.5 percent for the year.
Commercial
Office Space
New deliveries will run at or above the 2023 level. Depending on how vigorously under-construction projects are completed, statewide inventory may increase by a net 10 million square feet, half of that by the first quarter.
Net Absorption
Net absorption in 2024 will be negative with substantially more office space given up than leased. As a percentage of inventory, net absorption will range from minus 1 to 2 percent.
Rent
Average statewide rent across all classes will fall through 2024. December 2024 rents will be 3 to 4 percent below their 2023 end.
Commercial
Retail Space
Statewide inventory will remain unchanged, with the potential for a 1 to 2 percent increase or decrease from December 2023. This will depend on the rate at which older spaces are converted and how closely new construction matches demand.
Net Absorption
Retail net absorption as a percentage of inventory will be positive but lower in 2024 than in 2023. Total net absorption may approach ten million square feet or about 0.5 percent of inventory.
Rent
Retail rents are expected to end 2024 slightly above their December 2023 level. Up to 2 percent growth statewide is possible.
Commercial
Industrial Space
Even with macroeconomic conditions softening in 2024, deliveries will remain relatively strong. Depending on how vigorously under-construction projects are finished, total statewide inventory may increase by 1.5 to 3 percent by December 2024.
Net Absorption
Statewide net absorption will be healthy in 2024, but at two-thirds the rate of 2023, or about 50 million square feet. This is about 2 percent of December 2023 inventory.
Rent
Statewide industrial rents will continue increasing in 2024, but the 2 to 4 percent increase will be below 2023’s pace.
Land
Rural Land
Sales
Rural land sales volumes will continue to decline in 2024.
Prices
Median land price will reach a near-term peak, possibly by the end of 2023, and then decline.
Legal Outlook
TRERC expects the following legal and regulatory issues from the 88th Texas legislative session to eventually have a substantial impact on real estate markets. Ultimate impact will depend on factors such as implementation and interpretation by the legal system and market participants.
All Property Owners
SB 929 provides a process for property owners required to stop a nonconforming use. Owners may elect to receive certain costs plus the diminution in the market value of the property, or recoup that amount through continued nonconforming use.
Why this matters: Because property owners now have this option, municipalities may change the way they address zoning issues.
Homeowners
SB 2 (Second Special Session) makes changes to the property tax system, including an increased homestead exemption and a three-year, 20 percent appraisal cap on non-homestead properties under $5 million.
Why this matters: This may enable more homeowners to stay in their homes, and it may affect the real estate market and the general Texas economy.
Commercial Or Residential Developers
HB 3697 and HB 14 change what a county may require for plat approval, allow delegation of plat approval, and strengthen timing requirements and the consequences for failure to meet them. A qualified third party may conduct document review or development inspection if a regulatory authority fails to do so within 15 days after the time required.
Why this matters: This may streamline the approval process for developers, but it also may increase the potential for inconsistencies in plat approvals.
HB 1526 may affect development and markets in municipalities with population greater than 800,000 by prohibiting required dedication of parkland or fees in lieu thereof for commercial uses other than multifamily, hotel, or motel.
Why this matters: This change may encourage development in some cases by reducing costs and making more land available to the developer.
HB 2127 may eliminate some regulations by municipalities and counties.
Why this matters: It may result in easier, faster, or less expensive development.
>>View the forecast on the Real Estate Research Center’s website.
