Last updated on July 30th, 2023 at 06:22 am

The Houston housing market has seen steady growth over the last couple years and sellers and their real estate agents have certainly had their chance to make money.

In fact, like the rest of the U.S., affordability has become a key issue with rising interest rates. 

However, some indicators say it could soon reach a tipping point and form a bubble.

When a housing bubble forms in Houston, it will be an unsettling blow to the local real estate market.

Here’s what you should be aware of when there’s potential trouble ahead:

Spoiler alert

Home prices aren't going to crash anytime soon in Houston, TX. 

  1. Although inventory has increased, which is a good sign for sellers, it is still far below its average. 
  2. Single-family homes sales prices have only declined a minimal amount. Average prices have declined from $381,983 to $376,359 year over year.

What is a housing bubble

A housing bubble is a sudden spike in home prices that can make it very difficult for house buyers to find and buy properties!

This type of increase it not good for the housing market, as it often leads to increased debt and bankruptcies.

According to the Center for Research in Urban Economics, there are several factors that can lead to housing market bubbles.

One of the main factors that always plays a factor in a housing crash, is increasing inventory.

  • Without inventory, it seems you can’t have a housing crash.
  • Another factor that may cause a housing bubble is speculative behavior [when builders introduce too much inventory in the marketplace].

When investors buy properties with the intention of reselling them at an inflated profit in the near future, they create an unsustainable housing market.

When a housing bubble bursts, the price of housing drops, but it won’t drop overnight.

In the end, this can have devastating effects for both the economy and homeowners alike.

jan 22 vs jan 23 housing data houston, tx
image: courtesy of HAR

What causes a market to crash

When it comes to homes values crashing, there are many factors that can cause market crashes.

  1. These usually include mortgage rates increasing
  2. homeowners losing their jobs
  3. Inventory rising, and other black swan events. 

A housing crisis doesn’t occur overnight,  however,  a decrease in prices due to panic selling by many homeowners does occur. 

A housing crash can be caused by a major catastrophe, economic crisis, or the collapse of an extended speculative bubble.

Reactionary public fear may also play a role, inducing panic selling that further reduces prices.

Housing  crashes can have devastating consequences for home owners,  particularly those relying on equity investment returns for retirement.

housing inventory
image: courtesy FRED

How did property values fare in 2008

Compared to the rest of the nation, Houston, TX did surprisingly well.

Texas didn’t experience the surge for several reasons. 

  1. Texas didn’t experience the surge in prices like the rest of the country including Arizona and California
  2. Unemployment didn’t affect Houston like the rest of the country. 

2023 Houston job growth projections

Houston stands to benefit greatly from the current economic expansion, particularly in terms of jobs. Indeed, its job growth rate exceeds that of other major metropolitan areas and is expected to remain at that level for some time to come.

However, a recession may be on the horizon and big companies could start cutting jobs or capital spending as a result.

 That could derail their plans, but according to a recent survey of CEOs conducted by Conference Board, this does not appear to be happening yet.

Overall, Houston has made a good recovery from the pandemic and now experiences job growth that exceeds average. 

Unfortunately, both state and national economies have begun to cool off recently, making it more challenging for the city to rebound in 2023.

According to the Partnership’s forecast, Houston can expect around 61,000 new jobs in 2023. While this number falls below the region’s long-term average of 65,000 to 70,000, it still marks strong expansion.

image: courtesy of HAR

2023 Houston housing market outlook

In early 2022, mortgage rates surged and it appeared Houston’s real estate market was on the brink of collapse. 

Thankfully, that wasn’t the case–and now things are returning to normal in the local market.

Though the housing market in Houston may be experiencing some slowdown, there are still plenty of advantages to buying now.

 Inventory levels are rising, meaning buyers can benefit by waiting until more homes come on the market.

Home prices in Houston have been increasing at a slower rate than they had been over the last couple of years, which is encouraging news for homebuyers who hope to begin building equity with each mortgage payment.

If you’re considering buying in 2023, it may be wise to wait for more listings on the market. 

Doing this helps avoid getting into a bidding war with other prospective homebuyers and makes finding the ideal house within budget easier.

As of January 2023, the median list price was $336,282. That’s up 13.8% from December 2022 but still down a few dollars from last year.

Houston home prices and sales in 2022

Home prices and sales in Houston experienced record-low mortgage rates in 2021, encouraging buyers to purchase homes at an unprecedented pace post pandemic. As a result, Houston became one of the hottest property markets nationwide.

In 2022, as interest rate hikes and the potential recession loomed over the market, sales fell nearly 11 percent. This slowdown is forecast to continue into 2023 due to persistently high mortgage rates.

Home sales are already down.

In the coming year, Houston area homeowners can expect higher mortgage rates and a diminished selection of homes for sale. 

While this may cause a dip in the housing market, it won’t lead to a collapse like other major metro areas have experienced.

Aaron Dailey, a Realtor with the Houston Properties Team who represented Frank and Barbara Israel during their house purchase last year, reports that his clients were successful in weathering through the housing market slowdown by adhering to budgets and remaining patient. 

Furthermore, they were able to find an excellent home within their price range even as many other sellers began slowing down their listings in the second half of this year.

condo and townhouse sales in Houston tx
image: courtesy of HAR

Market Forecast for Townhomes and Condos

Sales of condos and townhouses in Houston  have been on the decline. According to HAR

  • Volume fell over 46%
  • 812 units sold in 2021 and while only 438 sold in 2022
  • Inventory also increased, adding .3 monthly to the supply. 

How much will home prices drop

If you’re in the market for a home, now may be an excellent time to do so. Experts believe that Houston’s housing market is one of the most stable in America.

Before making an offer on a property, buyers must weigh all the advantages and drawbacks. 

For instance, you may want to wait for inventory levels to increase so you can choose from more homes and the market becomes more competitive. 

This could potentially lower list prices as competition increases in the area.

Conversely, you might want to consider purchasing a home now as it will enable you to begin building equity immediately. 

This could prove an advantageous investment given the rising rents in your area.

Though some have expressed worry about a housing bubble in Houston, experts believe it’s unlikely. 

The city’s strong job numbers, higher mortgage rates and inflationary trends all point towards keeping the local housing market stable.

Time it might take for the houston market to rebound

Houston’s housing market continued to rebound after Hurricane Harvey caused devastation. Many people from high-cost cities such as New York, Los Angeles and San Francisco relocated here for cheaper living costs.

Houston offers an abundance of cultural experiences and boasts one of the nation’s most diverse economies.

 It boasts more Fortune 500 companies than any other US metropolitan area and it’s at the epicenter of America’s rapidly expanding oil and gas sector.

Houston’s housing market remains heavily in favor of sellers despite its robust economy. Inventory levels remain low and it would take five to six months before we see a shift towards buyers’ territory. 

Nonetheless, now is an excellent time to invest in Houston real estate due to its strong job growth, diverse economy, and high demand for homes in the coming years. 

For those interested in investing in Houston homes, working with an experienced real estate professional is recommended.

how buyers can benefit during a crash

A housing crash offers buyers a rare chance to take advantage of lower home prices. 

Sellers who need to move may be more willing to negotiate on their asking prices, and there are also plenty of short sales and foreclosures that offer great deals on homes.

Houston Real Estate is Ultra-Local

At the peak of Houston real estate before 2008-crisis, buyers typically made a return on their investment within four to five years. 

This is because Houston real estate has an exemplary record for holding value despite any downturn due to the quality of both neighborhoods and homes.

Due to the recent Houston housing market crash, many buyers lost faith in the city’s real estate market and chose instead to rent. 

This caused a decrease in sales. It’s essential for homebuyers and investors alike to remember that Houston remains an appealing option with its growing economy and vibrant job market. 

Now is still an excellent time to purchase a property here! Always consult with realtors and even their broker before you decide to make a purchase or your a seller trying to sell your home.