Historically, the housing market generally cools in October through the end of the year. Inventory tends to decline as fewer people buy in the fall and homes that have been listed for an extended period, tend to take a breather in November. This year, however, we continue to see inventory on the rise overall and a relatively cool market, even by relative historical standards.
The rise in inventory (up 1.7% this week) is a clear indication that there are fewer buyers in the market. With mortgage rates creeping close to 8% and the relatively low inventory keeping prices inflated (still expect prices to be 1-3% than 2022 by year’s end), would-be buyers are remaining on the sidelines. Recent reports forecast that interest rates may not fall at the same rate as previous expected in 2024. If that proves true, we may see a similar cool market continue deep into 2024.
There are other factors as well that indicate that the market may not heat up any time soon. With builders reporting traffic of prospective buyers down, 32% have cut prices and 62% are offering price incentives, both up from September. Confidence in an improvement in the next six months remains low as well; lower than the past few months.
We are starting to see the market react though to the higher mortgage rates. 38% of single-family homes on the market have had a price reduction and this number continues to trend up. Even with prices remaining sticky, there are growing indications that we may start to see some price weakening in the coming weeks.
On a more local level, Houston overall is sliding slowly into a more balanced market. Yesterday, my brokerage reported that we were at nearly 4 months of inventory overall in Houston. Spring Branch (77055) is at 3.8 months and Memorial (77024) is at 4 months. Although there are still pockets of activity (WestU, for instance) the market has definitely slowed since the summer. Inventory between 4-6 months is indicative of a balanced market. With us on the cusp of this in so many neighborhoods, I will be curious to see how quickly inventory rises, if at all, between now and the end of the year.
Marble Falls is up to 4.8 months of inventory, firmly moving out of a seller’s market, and Horseshoe Bay has actually slid downward over the past few months to 10.8 months. My guess is that the decrease in inventory is two fold - sellers pulling homes off the market as we inch towards the holidays and investors and second-home buyers tend to purchase homes during the off season as we saw the number of closings up 50% over this time last year (when the market in HSB was really dead). I would not be surprised to see inventory continue to trend downward as we move into the winter months.