The pace of home price appreciation is slowing after two years of runaway gains, but not enough for most Houstonians to buy a home.
Only about 41 percent of Houston-area households earned enough income to buy a median-priced home in the third quarter, according to a new report of the Houston Association of Realtors. While that’s slightly better than the previous quarter, it’s considerably worse than a year ago, when 53 percent of households could afford to buy a median-priced home in the area.
And before the pandemic two years ago, 59 percent of Houston households could afford to buy a median-priced home in the region.
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The median sales price for a single-family home in Houston was $349,500 in the third quarter. The minimum household income needed to buy a home at that price is about $90,000 a year, more than 40 percent more than the $62,000 needed a year ago.
In the third quarter of 2021, a buyer buying a median-priced home could expect to pay about $1,590 per month if they took out a 30-year fixed-rate loan, including taxes and insurance, to buy a median-priced home in Houston, according to HAR. A year later, a buyer could have expected to pay about $2,250 per month, assuming the buyer could get a 5.62 percent mortgage rate last quarter. (It should be noted that rates are now above 7 percentnevertheless.)
Of course, some pockets of Houston are still relatively affordable. In Harris County, the Aldine area was the most affordable: There, 49 percent of Harris County households earned a minimum annual income of $68,400 to pay for a median-priced home in the Aldine area. Stafford, Conroe, Angleton and La Marque were the most affordable areas in their respective Fort Bend, Montgomery, Brazoria and Galveston counties.
Meanwhile, Memorial Villages and West University Place were the least affordable in Harris County with only 3 percent of Harris County households able to afford median-priced housing in the communities. Buying a median-priced home in Memorial Villages required the highest minimum household income of $480,400, according to HAR.
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In Montgomery Country, The Woodlands was the least affordable with about 27 percent of households with a minimum annual income of $156,800 able to purchase a median-priced home in the area, according to HAR.
Despite higher mortgage rates and affordability continues to be a challenge, fewer homebuyers are competing for properties, which gives them a bit more leverage in negotiations with sellers. Slower sales activity is expected to ease the pace of price growth, though most real estate agents don’t expect home prices to return to pre-pandemic levels.
“Homebuyers have had to navigate an overheated market for the past year, but conditions have cooled to pre-pandemic levels in recent months,” said HAR President Jennifer Wauhob with Better Homes and Gardens Gary Greene in a statement. “We’ve seen home sales slow, prices level off, and inventory up. These are all indicators that we are getting closer to more normal pre-pandemic conditions, and that should create more choice and opportunity for consumers.”
