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Thirty-nine percent of Houston-area households could afford to buy a median-priced home in Q2 2023

 

HOUSTON — (August 10, 2023) — Despite easing home prices, higher interest rates stifled housing affordability in the Greater Houston area in the second quarter of 2023 compared to a year ago, reports the Houston Association of Realtors (HAR).
 

Thirty-nine percent of households could afford to purchase a median-priced home in the Houston area in the second quarter of this year, down from 42 percent in the first quarter of 2023 and unchanged from the second quarter of 2022, according to HAR’s Housing Affordability Index (HAI). 
 

HAR’s 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 2.5 percent to $348,300 in the second quarter of this year. Due largely to elevated interest rates, the monthly mortgage payment on a 30-year, fixed-rate loan, including taxes and insurance, rose to $2,400 from $2,230 a year ago. The average interest rate climbed to 6.50 percent in the second quarter of 2023 compared to 5.27 percent last year. A minimum annual income of $96,000 was needed to qualify for the purchase of the median-priced home, which is 7.6 percent more income annually than they did a year ago.
 

The Houston area was more affordable compared to the Austin, Dallas and San Antonio metro areas, according to the data. Thirty-seven percent of households across Texas could afford to buy a median-priced home in the second quarter of 2023, which is unchanged from the second quarter of 2022. An annual household income of $95,600 was needed to qualify for the purchase of a $347,320 median-priced home statewide. 
 

Compared with Texas, 35 percent of the nation’s households could afford the $402,600 median-priced home, which required a minimum annual income of $102,400 to make monthly payments of $2,560. Nationwide affordability was down from 36 percent at this time 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 compared to the second quarter of 2019 when the median home price was $249,400. Median home prices are 39.7 percent above where they were at the same time four years ago. Fifty-eight percent of Houston-area households could afford to buy a home in the second quarter of 2019 compared to 39 percent in 2023.

 

“Rising interest rates continue to weigh on potential homebuyers who are faced with the challenge of balancing affordability and opportunity,” said HAR Chair Cathy Treviño with LPT, Realty. “Some prospective buyers are exercising caution due to the uncertain economic conditions, and this is driving strong consumer interest in the rental market.”
 

Renters saw some relief during the second quarter of 2023. Lease prices for a single-family home declined in most of the Houston area in the second quarter, 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 decreased from $2,050 in 2022 to $2,000 in 2023. As a result, rental affordability increased from 44 percent last year to 47 percent in 2023. Households needed to make a minimum annual income of $80,000 to afford the median lease payment on a home. This does not include the security deposit or cost of utilities.

Highlights from the Q2 2023 Housing Affordability Report:

• Compared to the previous year, housing affordability declined in seven tracked counties (Austin, Fort Bend, Harris, Liberty, Polk, San Jacinto, Waller). Affordability was unchanged in two counties (Grimes, Wharton). Affordability increased in seven counties (Brazoria, Chambers, Colorado, Galveston, Matagorda, Montgomery, Walker).

• The most affordable counties were Chambers County (54 percent), Wharton County (51 percent) and Colorado County (49 percent). 

• In Harris County, the Aldine Area and Baytown were the most affordable communities. Forty-six percent of Harris County households made the minimum annual income of $73,200 to afford a median-priced home in the Aldine Area and a minimum annual income of $74,000 for a home in Baytown. River Oaks and West University Place were the least affordable with only two percent of households in Harris County able to afford to purchase the median-priced home in the communities. 

• In Fort Bend County, Stafford was the most affordable area—63 percent of Fort Bend County households were able to afford the median-priced home in Stafford based on the minimum annual income of $76,400. Cinco Ranch was the least affordable (21 percent).

• In Montgomery County, Willis was the most affordable area—74 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 (27 percent) with households needing a minimum annual income of $165,200.

• In Brazoria County, Angleton was the most affordable—63 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 (22 percent).

• In Galveston County, La Marque was the most affordable—54 percent of Galveston County households were able to afford the median-priced home in La Marque based on the annual income. Friendswood was the least affordable (21 percent).

 

Highlights from the Q2 2023 Rental Affordability Report:

• Compared to the previous year, seven tracked counties saw an increase in rent affordability. Affordability declined in one county (Liberty) and was unchanged in one county (Chambers).

• Lease prices were most affordable for households in Montgomery County. Based on the median annual income, 57 percent of households in Montgomery County could afford the median monthly rent of $2,000 for a single-family home.

 

For HAR’s full Housing and Rental Affordability Reports and data tables, click HERE.