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HOUSING AFFORDABILITY DECLINES DESPITE EASING HOME PRICES IN THE HOUSTON AREA

Forty-two percent of Houston-area households could afford to buy the median-priced home in Q1 2023

HOUSTON — (May 9, 2023) — As home prices moderate across the Greater Houston area, soaring borrowing costs are making it challenging for many people to buy a home. Housing affordability continued to decline in the first quarter of 2023 compared to a year ago, reports the Houston Association of Realtors (HAR).

The percentage of home buyers who could afford to purchase a median-priced home in the Houston area dipped to 42 percent in the first quarter of this year from 47 percent last year, according to HAR’s Housing Affordability Index (HAI). 

The HAI measures the percentage of households that can afford to purchase a median-priced, single-family home in the Houston area as well as other select regions and counties across Texas.
 
The median home price in the Houston area declined 1.1 percent to $327,000 in the first quarter of this year. Due largely to increased interest rates, the monthly mortgage payment on a 30-year, fixed-rate loan, including taxes and insurance, rose to $2,230 from $1,840 a year ago. The effective composite interest rate was 6.34 percent in first-quarter 2023 compared to 3.82 percent the same time last year. As a result, Houston-area households needed to earn 21.2 percent more income annually than they did a year ago to afford a median-priced home. 
 
Forty percent of households across Texas could afford to buy a median-priced home in the first quarter of 2023 compared to 45 percent a year ago. An annual household income of $90,000 was needed to qualify for the purchase of a $329,999 median-priced home statewide. 
 
The national median home price declined 0.2 percent from a year ago to $371,200. Thirty-nine percent of households could afford to purchase a median-priced home, which is down from 46 percent last year. 
 
The chart below shows how the minimum annual household income needed to purchase a home has changed year-over-year.

   
For a pre-pandemic perspective, home prices in the Houston area have increased considerably compared to 2019 when the median home price was $235,900. Median home prices are 38.6 percent above where they were four years ago. Fifty-nine percent of Houston-area households could afford to buy a home in the first quarter of 2019 compared to 42 percent in 2023.
 
“Although prices have moderated from the pandemic peak, volatile interest rates are pushing monthly mortgage payments higher and keeping some potential buyers sitting on the sidelines,” said HAR Chair Cathy Treviño with Side, Inc. “For people who are looking to buy, there is a robust inventory, and we anticipate more listings to come onto the market during the typically busy spring season and summer months.”
 
Down Payment Resource
As housing affordability remains a challenge for many households in the Greater Houston area, HAR has launched a new down payment assistance tool. HAR is collaborating with Down Payment Resource (DPR) to display down payment assistance programs on more than 165,000 listings across Texas on HAR.com. 
 
More than 85 percent of listings in the HAR Multiple Listing Service (MLS) are eligible for at least one homebuyer assistance program. There are more than 2,000 homeownership programs available across the country that are funded at the local, state, and national level. The programs provide down payment and closing cost assistance to new and some repeat homebuyers. There are additional incentives for veterans, active military, law enforcement, firefighters, healthcare workers and educators.
 
Consumers can search by address or neighborhood to find programs that are available in a particular area on the Down Payment Assistance section of HAR.com. 
 
Rental Affordability Update
Lease prices for a single-family home increased in most of the Houston area in the first quarter of 2023, according to HAR’s Rental Affordability Index, which measures the percentage of households that can afford to pay the median monthly rent for a single-family home in the Greater Houston area.
 
The median lease price increased from $1,900 in 2022 to $1,950 in 2023. However, more households were able to afford a rental home since wages also grew in the first quarter of the year. Rental affordability increased from 46 percent last year to 48 percent in 2023. Households needed to make a minimum annual income of $78,000 to afford the median lease payment on a home. This does not include the security deposit or cost of utilities.
   
Highlights from the Q1 2023 Housing Affordability Report:
• Compared to the previous year, 13 tracked counties saw a drop in housing affordability. Affordability was unchanged in one county (Walker County). Affordability increased in one county (Polk County).
• The most affordable counties were Polk County (68 percent), Chambers County (53 percent), and Montgomery County (47 percent). 
• In Harris County, Memorial Villages, River Oaks and West University Place were the least affordable with only 3 percent of households in Harris County able to afford to purchase the median-priced home in the communities. Pasadena was the most affordable in Harris County—50 percent of Harris County households made the minimum annual income of $68,400 to afford a median-priced home in Pasadena. 
• In Fort Bend County, Stafford was the most affordable area—64 percent of Fort Bend County households were able to afford the median-priced home in Stafford based on the minimum annual income of $74,000. Sienna was the least affordable (27 percent).
• In Montgomery County, Conroe and Montgomery were the most affordable area—51 percent of households in the county were able to afford the median-priced home in those areas based on the annual income. The Woodlands was the least affordable (26 percent) with households needing a minimum annual income of $166,400.
• In Brazoria County, Angleton was the most affordable—62 percent of Brazoria County households were able to afford the median-priced home in Angleton based on the annual income. Manvel was the least affordable (24 percent).
• In Galveston County, La Marque was the most affordable—57 percent of Galveston County households were able to afford the median-priced home in La Marque based on the annual income. Bolivar Peninsula was the least affordable (26 percent).
 
Highlights from the Q1 2023 Rental Affordability Report:
• Compared to the previous year, all nine tracked counties saw an increase in rent affordability.
• Lease prices were most affordable for households in Montgomery County. Based on the median annual income, 59 percent of households in Montgomery County could afford the median monthly rent of $1,900 for a single-family home.
 
For HAR’s full Housing and Rental Affordability Reports and data tables, click HERE.