Home prices head higher as shortage of homes on the market persists
Home sales are slowing, but prices are still rising in many cities across the nation.
In Houston, home sales fell by 11 percent in 2022, while the average home price went up by 10 percent, according to the Houston Association of Realtors.
Prices are maintaining their lofty levels because the supply of homes on the market is tight. Houston’s 2.7 months of inventory, representing the time it would take to sell everything on the market at the current sales pace, more than doubled over the year but is still low by historic standards, according to HAR. A balanced supply would be six months.
The typical U.S. home value reached $329,542 in January, holding steady with December and up 6.2 percent compared to January 2022, according to the Zillow Home Value Index, which estimates the values of all homes in a market. While 4.1 percent below the peak price set in July, the value was still 39 percent higher than before the pandemic.
Houston, along with Atlanta, Philadelphia and Miami, were big gainers for home values, according to Zillow.
Homes values in Houston were up 5.3 percent over the year to $295,108 in January, according to Zillow. Other Texas cities with increases included Dallas-Fort Worth, up 4.5 percent to $359,743, and San Antonio, up 5.3 percent to $287,206. Values in Austin, which posted some of the nation’s biggest price gains recently, were down by 1.1 percent to $476,581.
The low supply of homes means prices keep rising.
There needs to be more home building to create a larger inventory of homes to address the nation’s housing shortage, said Robert Dietz, chief economist of the National Association of Home Builders.
“Building more homes and apartments is the only way to tame inflation, satisfy unmet demand, achieve a measure of price stability in the for-sale and rental markets, and ease America’s housing affordability crisis,” Dietz told a senate banking committee earlier this month.
During the pandemic, home prices soared to record highs as buyers sought homes with more space, took advantage of low interest rates and often got into bidding wars. A majority of the homes sold in Houston in April, May and June, at the height of the homeselling season last year, sold for above the asking price, according to HAR.
“People saw houses going under contract in a couple of days. Those times are over,” said Dan McCarver, an agent with Better Homes and Gardens Real Estate Gary Greene — Bay Area/ Clear Lake. “But a reasonable market time of 60 days is very normal. That’s kind of the reality for now.”
The huge run-up in sales stopped last year after the Federal Reserve moved to tamp down inflation by raising interest rates. In 2021, rates for a 30-year mortgage were below 3 percent. By late 2022, the average peaked at just over 7 percent. People with low mortgage rates are hesitant to give them up, which continues to suppress the supply of homes for sale.
Home builders are feeling the pain of higher mortgage rates. The National Association of Home Builders is expecting a 26 percent drop in home starts this year.
The mortgage increase makes a big difference in affordability.
In Houston, the monthly mortgage cost of $1,436 to buy a typical home was 46 percent higher in January than a year ago, according to the Zillow analysis.
Other highlights from the Zillow study:
• Home values in Philadelphia were up 7 percent over the year to $323,974 in January. The mortgage payment of $1,561 represents a 45 percent increase from a year ago;
• The value in Atlanta was up 6.1 percent to $323,974. The mortgage payment is 48 percent higher than last January;
• The value in Miami shot up 12.8 percent in January to $442,044. The monthly payment of $2,141 is 56 percent higher than a year ago;
• Values in Los Angeles were up slightly to $841,462. The $4,151 monthly mortgage payment is 39 percent higher than a year ago.