Houston’s housing market is normalizing after pandemic boom, agents say at industry conference

Key takeaways

• Houston home prices fell 1.2% year-over-year in October while inventory surges, shifting power to buyers.
• Thanks to lower mortgage rates, the fall market rebounded with November activity already approaching peak summer levels, NAR NXT attendees noted.
• Pandemic buyers who overpaid now struggle to sell as rising insurance costs and homebuilder incentives create resale challenges.

Houston buzzed as thousands of real estate agents descended on its downtown for their largest meeting of the year, NAR NXT.
The convention, hosted by the National Association of Realtors, brings together members from across the industry and the world annually. This year, the group met in Houston, where real estate insiders say the fourth-largest U.S. city is nearing a critical turning point.

“It’s a really encouraging market right now” in terms of activity, Shae Cottar, chair of the Houston Association of Realtors and regional director for LPT Realty, told Homes.com in an interview on Thursday.

“We don’t have a crystal ball,” he added. “All we can look at is what’s happening right now and compare that to what’s been happening, and it does feel like [prices] are beginning to tick down again, to normalize a little bit more.”

Indeed, data from Homes.com released on Thursday shows that Houston home prices fell 1.2% in October compared to a year earlier, a continuation of a trend that began earlier this year and a sign that the market frenzy induced by the COVID-19 pandemic is continuing to wane. At the same time, the city topped the list of the 40 largest markets for new listings in October, adding more than 42,000 for-sale homes. Combined with easing mortgage rates, that’s made Houston’s housing market ripe for more balanced activity.

And data from the Houston Association of Realtors released this week showed that in October, the measure of list-to-sale price fell to its lowest level since the group started tracking the metric. In other words, homes are selling for less than they're originally listed for.

“The market in Houston is slowly, but surely, shifting in favor of buyers,” Itziar Aguirre, senior director of market analytics at Homes.com, said in a statement. “There are signs of oversupply in Houston’s housing market, especially in the condo and townhomes segments. Listings are at an all-time high, and prices are falling, giving buyers more negotiating power.”

That “negotiation power” has fueled an unusually strong fall market for Houston, Cottar said.

“We had our typical summer frenzy of activity. Coming out of that, we went down in September. ... There was a huge drop,” he said. “In the first week of November, we’ve already done 60% of what we did the whole month of August when we were at our height.”

The growth isn’t isolated to big brokerages such as Cottar’s either. Troy Cothran, broker-owner at Victory Properties, told Homes.com that his team of 10 has seen a similar trend.

“What we’ve seen in the last five, six weeks is the market’s picked up,” Cothran, who also serves as secretary and treasurer for the Houston Association of Realtors, said in an interview on Thursday. “Nobody expected [mortgage] rates to come down to the degree that they have, which has been a good thing.”

Both Cottar and Cothran noted that while the market has slowed from the acceleration in the early 2020s, it’s settled right around 10-year norms. While inventory is increasing, it’s still being purchased at a pace that would be considered reasonable compared to pre-pandemic levels.

“When I look at things like our days on market, our months of inventory, our price points overall, knowing that I see that graph kind of slumping downwards, that’s a good thing,” Cothran said.

All that said, Cottar said he still thinks there’s “pent-up buyer energy” that has yet to be unleashed, especially given the uncertainty created by the recent government shutdown and economic data.

“A lot of it is out of our hands,” he said. “People like stability. Economics is based on stability. And if you look at the last several years, we’ve been anything but stable. I really feel like what that hesitation is, is based on instability.”

Home sellers, on the other hand, face a different slate of challenges.

During the pandemic, buyers were all but rabid to buy in Houston, creating a cutthroat environment that gave way to paying more than market value. Now that that frenzy has faded, inventory is balancing and home prices are ebbing, some sellers are in a difficult spot.

“That’s the untold story of what we’re seeing in so many markets right now,” according to Cottar, who pointed to the beach town of Galveston, Texas, where both agents see homes sitting longer than usual. According to Homes.com data, properties in Galveston sell after an average of 93 days compared to 53 nationally.

At the same time, the cost of taxes and insurance has risen sharply in the past five years, creating financial stress for homeowners, Cothran said. A July report from Rice University showed that property insurance climbed more than 40% between 2015 and 2023 in Harris County, where Houston is located, mostly due to the increase in property values and severity of storms in the area.

It has created a new predicament for buyers: Take a loss on their home by accepting a price below what they paid or continue paying exorbitant taxes and insurance fees.

That has been exacerbated by the presence of homebuilders in Houston who can offer buyers incentives, including the opportunity to make upfront payments for a lower mortgage rate.

“Now, I think the builders are still doing a lot of that,” Cothran said. “It’s been more difficult for those resales because they can’t compete sometimes with those buydowns or some of those incentives.”

All told, while the Houston market is showing signs of a strong fall and winter season, it’s still got a way to go to reach pre-pandemic normalcy, according to Cottar.

“When you’ve got folks who paid $50,000 to $100,000 over market value — whatever the public is willing to pay for — just three or four years ago, and now those same folks are wanting to sell it at that rate and the public’s going ‘no, thanks,’” he said, “there’s going to be some sort of reckoning.”

Homes.com, part of CoStar Group, was a sponsor of the NAR show.