Cy-Fair housing prices remain high due to low inventory and rising mortgage rates

With insufficient inventory in the single-family housing market and an influx of buyers, Cy-Fair’s average home price has increased by nearly $120,000 since the onset of the COVID-19 pandemic in March 2020 through April, according to data from Texas Real Estate Research Center.

Tara Room, a local real estate agent with Keller Williams Professionals Houston, said the seller’s market, defined by weak supply meeting strong demand, is expected to continue. Although activity has slowed since the start of the pandemic due to rising interest rates, demand remains high locally, she said.

“There are a lot of people who seem to think this is going to be a quote-unquote change, but that’s not going to change anytime soon,” Hall said. “What we’re seeing is a shift in the market because interest rates have gone up a few points since the start of the year, so instead of seeing, say, 40 offers on a house, you can see 20. Or you may see some houses staying a bit longer, like seven days instead of three.

Local income trends are lagging rising house prices, posing affordability issues, property experts said. Some 41% of Harris County households earn the minimum qualifying income to afford a median-priced home, according to the Houston Association of Realtors. Housing Affordability Index. That number drops to 30% in Cypress and 33% in Jersey Village.

Lawrence Dean, senior vice president of consulting for Texas at a housing market research firm Zonda, said that historically, Houston has been known as one of the most affordable metropolitan areas in the United States because the market can usually provide more housing as needed. In Houston, there are minimal regulatory barriers and natural barriers that inhibit growth in other parts of the country, he said.

As low inventory drove up prices in the resale home market during the pandemic, homebuilders ramped up production, experts said.

Nearly 21,000 homes are under construction in the Houston area, the most Zonda has ever seen in its quarterly tallies, Dean said. According to a report by demographers at Population and survey analysts released in May, approximately 11,750 single-family homes and 8,800 multi-family units are planned for the Cy-Fair area over the next five years.

But new homes have also become more expensive. In the 77433 zip code, where most of Cy-Fair’s new home construction takes place, the average sale price of homes fell from $374,800 in June 2020 to May 2021 to $445,559 in June 2021 to May 2022 , according to data provided by The Baker Foreman Team at Better Homes and Gardens Real Estate Gary Greene in Cypress.

“The cost of building materials, the cost of labor and the cost of land – it takes all of those things to build a new house – the cost of all of those items has increased exponentially during the pandemic,” said Dean. “Part of it was the supply chain; part was work-related availability [or] a mixture of both. »

Inventory issues

In April, the Copperfield submarket had 0.4 months of inventory, compared to 1.8 months in April 2019, according to TRERC. This measure indicates the estimated time it would take before the supply of housing was exhausted. Similarly, North Cypress had about 0.5 months in April.

In the southwestern part of Cypress, inventories were higher at 1.3 months in April from 3.1 months two years earlier, the center reported.

Hall said the market will become more balanced when homes are on the market for three to six months. A buyer’s market occurs when homes are listed for about six months or more. According to TRERC, this has not happened at Cy-Fair since the organization began tracking months of inventory at the submarket level in 2015.

“It’s going to take a hot second to even build up enough inventory to satisfy all of the buyers who are [looking]”, Hall said. “When you have 20 offers for each house, you have 19 buyers still looking for houses.

After the Great Recession of 2007-2009, house prices increased only slightly year on year for about a decade. However, Hall said homes are gaining about 4% in value annually, so the prices buyers are seeing today are more in line with what they would have been without the Great Recession.

“While we can see that the houses are not going to continue to appreciate in the volume that they are currently seeing, 10% and 20% year over year, it will slow down to 4%, but that does not not going to drop badly,” Hall said. “It’s not going to go back to normal.”

Planned communities Bridgeland, marvida and Avalon in Cypress are expected to add the most single-family homes in Cypress over the next decade at 3,478, 2,588 and 1,684, respectively, according to PASA.

Interest rate effects

The median value of single-family homes in Metro Houston rose 16% from May 2021 to May 2022 and is now the highest on record at $351,000 despite falling year-over-year sales, according to HAR. Rising interest rates should be a major cause of the decline in real estate sales.

Dean said those who bought homes in the past two years have been able to afford higher prices because interest rates have fallen to historic lows. Monthly housing costs were about the same as they historically would have been for a cheaper home at a higher interest rate, he said.

However, since the start of the year, interest rates have started to rise again and are now even higher than they were before the pandemic. According Freddie Macthe average 30-year fixed-rate mortgage in the United States was 3.11% at the end of 2021 and rose to 5.78% in mid-June.

Dean said this trend could contribute to a pivot towards a more balanced market in the coming months.

“Just being a balanced market would be extremely more favorable to buyers than anything buyers have seen in two years at this rate,” he said. “So I wouldn’t be surprised if that kind of development over the rest of this year, just like rising interest rates kind of does what the feds intended to do, which is to slow down a frothy, hot economy and drop the frenzied housing market and related prices.”

Affordability issues

As house prices and interest rates continue to rise, experts said fewer people may be able to afford homes. Hall said many first-time home buyers aren’t able to compete with market prices right now.

According to HAR’s Housing Affordability Index, only 30% of Cypress households earn the minimum allowable income of $103,200 to pay the median home price of $395,000. This eligible minimum income has increased by around 25.9% in just one year, similar to the national increase of 26.5%.

While HAR reports that the Cypress and Jersey Village submarkets have median home prices higher than the national median home price of $368,200, HAR officials said about 47% of area residents Greater Houston could afford the median metro home price of $330,800.

“We have less inventory than that, so don’t just assume you’re one of those 53% who can’t qualify based on your income,” HAR President Jennifer Wauhob said.

While the entry-level price in Northwest Houston used to be around $150,000, it’s now under $300,000, Hall said. Of the homes sold at Cy-Fair in April, about 38% were worth more than $300,000. Less than 2% sold for less than $150,000, according to data from the Baker Foreman team.

Local prices, however, seem more affordable for customers moving from states with more expensive housing, such as California, New York and Michigan, Hall said.

“Affordability is definitely becoming an issue, but we have this influx of people from out of town, … our prices look good to them,” she said.

While Houston-area homes may seem out of reach for many of its residents, Dean agreed that Houston retains its status as affordable compared to other major metros in the state and the United States.

“It’s less affordable here than before, but still compared to other housing markets, it’s affordable. That market was just an incredibly affordable market, and it’s not quite that anymore,” Dean said.

Hunter Marrow and George Wiebe contributed to this report.