With Higher Mortgage Rates But A Slowing Houston Housing Market: Is It Time To Buy A Home Now?
Real Estate Insights From Houston's Best Realtors
Mortgage rates increased significantly this year, inflation shot up to 9.1%, and the housing market stalled. If you've been attempting to purchase a property for some time, you might feel a bit down right now. Will we ever find a good time to buy?
The answer depends mainly on your goals. Courtney Williams, a top-ranked Realtor with the Houston Properties Team of Keller Williams Memorial, the #1 boutique real estate team in Houston, is an expert on the matter. After navigating through a chaotic housing market the past few years, Courtney believes that "in many aspects, we have returned to where we were at the beginning of 2020." With a stabilized market, finding a home you prefer at a reasonable price might be more manageable.
Finding the perfect time to buy or sell in any market can be difficult, if not impossible. Buyers will primarily base their decisions on needs rather than market reasons. As Courtney points out, "regardless of where we are in the housing cycle, people will still buy and sell homes if they have the need."
Here's what you need to know about buying a Houston house in 2022.
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“Paige and her team are knowledgeable, attentive, responsive, and patient. The HoustonProperties.com team put us into our first dream home, and due to that experience, we’ve returned to them time and again for our real estate needs. While the team’s focus is on completing your deal, their endgame is to ensure your needs are preserved and satisfied.” - Peter McGillivray & Jillian Jopling
Table of Contents
- Is Now A Good Time To Purchase A Property In Houston?
- How To Assess If You're Ready To Buy A Houston Home In 2022
- Tips And Tricks For Buying A Home in Houston
Is Now A Good Time To Purchase A Property In Houston?
"Every single member of the Houston Properties Team was a delight to work with. They are always available, attentive, and active in the pursuit of the right buyer. Their advice was spot-on and helped us sell our home in just 5 days. Best of all, when it really mattered, they bent over backward to ensure an easy closing. We cannot thank them enough. If you want a smart team with a solid understanding of the market on your side, I recommend you hire the Houston Properties Team – they won't let you down.” – Linda Chang
Buying a home might be a dream come true for some, but it can also be stressful if you're not prepared enough. You need to know numerous information and constantly look out for pitfalls when buying a house. It is also nerve-wracking to think that you will deplete your savings for a home while the economy is in recession and unemployment is rising. Market characteristics commonly impact consumers' choices to buy, sell, or keep renting. These are some elements that could influence your decision to purchase right now:
Increasing Home Prices In Houston
There's no secret that housing prices soared during the pandemic. The average housing price of single-family homes in Houston was $329,801 in September 2020 and rose to $414,776 by September 2022. Median home prices in Houston were $343,950 in September 2022, higher by 14.7% than last year; this left many first-time homebuyers struggling to find affordable homes.
Even if you don't want to purchase while prices rapidly increase, it is difficult or impossible to forecast when and if prices will decrease. Furthermore, delaying buying might result in you paying even more, as seen by the steady and long-term increase in housing prices in previous trends.
Slowing Houston Market
Despite home price increases, the market has been slowing down. Fewer buyers are putting in offers on properties for sale.
Courtney has seen this cool down in her local market, and she explained, "in the past, there were multiple offers in any property, but now there might be two or one, and those are better odds." Courtney continued, "before the interest rate boost in March 2022, it was uncontrollably heated and out of balance, but the rate hike has given them some buyers hope."
Some buyers left the market as a result of the rate hike. However, buyers who previously lost out on multiple homes aren't facing as many rounds of offers and rejections now.
Increasing Mortgage Rates in Houston
The Federal Reserve reduced interest rates to practically zero to keep the economy afloat throughout the pandemic. However, they recently increased them because of inflation worries. When Federal Reserve increases the Fed Funds Rate, banks pay more so that they can borrow funds for lending money. Banks typically transfer this cost onto homeowners through increased mortgage rates.
When mortgage rates rise, it can cause a temporary dip in home-buying activity. It is essential to know that the rates are at their lowest based on historical data.
"In some ways, it's ideal to buy now and get a fixed-rate housing cost. There's no such thing as 'saving money too early,'" Courtney says. Even though rates may be higher than two years ago, buying now guarantees a predictable monthly payment, especially when compared to renting rates, which may also see some hikes.
Lack Of Inventory in Houston
The lack of supply heavily influenced property prices over the past few years. The high demand leads to price inflation and bidding wars. While new home listings have slowed in recent months, what will housing inventory look like going forward?
In Houston, single-family home sales fell by 17% compared to last year in September. This September, the average housing inventory in the United States is 3.2 months, while in Houston, it's 2.7 months — lagging behind the national average.
"We've been severely under-building for quite some time, and there's a shortage in the market," Courtney states. Inventory continues to tighten, and new home building hasn't kept up with demand, which could keep home prices from dropping.
Rising Rental Rates In Houston
Rental rates have been rising due to a low housing inventory. Renters face a shortage of affordable housing due to the slowdown in single-family and condo construction, which has deeply influenced the rental market.
According to a study about Housing Centers at Harvard University, rents rose 4.2% year over year in 2015 but rose 11% year over year in 2021. In Houston, average rent prices soared by 23% in the past seven years.
Locking in a fixed housing payment could be the best solution if you live in a market where rents have grown by double-digit percentages.
How To Assess If You're Ready To Buy A Houston Home In 2022
“Paige Martin and her team are simply the best. She has worked with my husband and me for the last couple of years in our quest to find the perfect first home. She was patient with us throughout the process and took the time to answer all of our questions! She knows so much about the housing market so we felt very confident that we were in great hands!” – Dr. Jen Shroff
How do you know you're ready to buy a house? While saving for a down payment is crucial, buying a home involves more. Here are a few other things to think about before you proceed with the home-buying process:
Check Your Credit Score
In reviewing your mortgage application, lenders retrieve your credit report. This rating reflects your prior financial management skills. If it's low, you'll often have a more challenging time qualifying for a mortgage and presumably have to pay a higher interest rate. You could not be eligible at all if it's too low.
A few months (or earlier) before you want to apply for mortgages, check your credit score and address any issues.
Review Your DTI
An additional crucial aspect of the mortgage application procedure is your debt-to-income ratio. Lenders will be concerned if you already have a lot of debt, such as credit cards, school loans, and vehicle loans since they fear you won't be able to pay your mortgage.
To lower your DTI ratio and improve your chances of approval, think about consolidating debt or refinancing student loans before you start the home-buying process.
Apply For Mortgage Preapproval
Mortgage preapproval determines your budget when looking for a house. Most real estate brokers will not work with customers who are not pre-approved; to save you time, they prefer to show you potential homes in your price range.
Research Home Values In Houston
Now that you know the price point within your budget, it's time to look at different homes. To discover what is available, review data on what has sold in your community and similar properties. You may also search "recently sold" to get a sense of market activity.
Remember that most properties don't routinely update their final sale price, so they could sell for more than initially estimated. We can help you learn more about the state of the market while you conduct your house search.
Tips And Tricks For Buying A Home in Houston
"The Houston Properties Team under the leadership of Paige Martin is one of the most successful real estate teams in Texas. Paige and her team take the pain out of the real estate experience through hard work, proprietary systems and processes, and a deep understanding of the hyper-local Houston real estate market. She's ranked #5 in Keller Williams worldwide and #1 in Houston with good reason." – Sandy (Google Review)
Okay, now you've decided that you're going to buy a house in 2022. Now what? Follow these tips to navigate Houston's real estate market successfully.
Find A Good Houston Realtor
A good Realtor is knowledgeable about the market, provides information not accessible online, and keeps your best interest at heart. They'll email, call and text you when a new house enters the market. They check for upcoming houses and use their network to locate the perfect place for you.
Additionally, they assist with the introductory talks that follow the acceptance of an offer and the writing of the request itself.
The best way to ensure you experience seamless transactions is to partner with an expert in the area. Contact Houston Properties Team, the no.1 real estate team in Houston, for a faster and easier home buying process.
Be Flexible And Patient
When buying a home, list your "needs" and "wants." Pick off some of the things that are just a preference. For example, you need "first-floor living" and prefer a "primary bed on the first floor." You can easily send the list to your agent, who will give you a home you'll like.
Well, that was when inventories were high. Now, in 2022, you need to be flexible on some regions of your preference. As Courtney puts it, today's buyers "have to realize that affordability is down. As a first-time homebuyer, you'll probably not be able to buy your dream home. Focus on what matters to you and hone in on that."
Being flexible could mean everything, from the closing date to appliances staying in the house. Keep in mind that you can always upgrade later on.
Find Programs In Houston That Offers Down Payment Help.
First-time homebuyers can take advantage of multiple state and federal homebuyer programs. Some offer down payment assistance, and others extend mortgages at lower rates. If you're a veteran, teacher, firefighter, or law enforcement officer, you also might qualify for help.
Research and ask your mortgage lender for guidance to see what programs you might qualify for. You can also ask your agents to refer some mortgage brokers for you.
Always Get A Home Inspection
Finally, always get your house inspected. Even though you waived your right to inspect repairs, you should still be aware of any possible re-sell problems. You may schedule a contractor to fix any necessary repairs in this manner.
The reality is that there can always be mishaps in buying a home. The real estate market has its pattern, but it isn't accessible to time them ideally. It's better to buy when you have the need and are financially ready to start building equity for the future.
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