One thing, perhaps the most important thing markets do not like is uncertainty. Whether we are talking about Wall Street or your local housing market, uncertainty creates paralysis by analysis. Today’s housing market is delivering some uncertainties with respect to interest rates and everyone is wondering where is the ceiling and when will the FED ease up on rate hikes? Once we answer those questions, all of our markets will resume normal activity. It does appear that inflation is easing and that should slow the interest rate hikes from the FED, as well as stabilize pricing across various industries.

The pandemic is the root cause for a lot of what we are experiencing not only in the housing market, but other markets as well. But, this is a real estate blog, so let’s focus on housing. As the pandemic created a robust housing market in the suburbs, new home builders couldn’t keep up with demand. It takes a builder approximately 24 months from identifying a developable property to building a home on the aforementioned site. With demand at frenzied paces across the nation, buyers far outnumbered sellers and drove prices skyward. Coupled with supply chain constraints, labor issues, and a myriad of other challenges, demand increased dramatically, resulting in year over year price increases of dramatic proportions.

Now, since new home builders are not starting enough homes, and interest rates hovering in the high 6%-7% range, inventory is not increasing fast enough to offset the higher costs of home ownership by reducing prices. And therein lies the rub. Entry level homebuyers will still participate as rents are increasing and it still makes sense for them to purchase. At the other end of the spectrum, luxury buyers are still participating at a respectable clip given that they are less sensitive to a higher rate environment. It is our move-up buyer/seller that is paralyzed by this market more than any other. Many are staying put in their current home even though they would like to make a move. Aspirations of previous selling price highs are no longer a guarantee. Many will choose to wait out this inflationary period thereby reducing expected housing inventory.

All of this points to pricing pressure across all price points even in this market. Pockets across the country that zoomed northward in value over the past two years will certainly see some pullback from Spring 2022 highs. Markets like Boise, Nashville, Las Vegas, and Phoenix should correct in line with anticipated gains from November 2019 values as a benchmark. The Houston market is going to move along as it typically does without too much fanfare. It is why Houston ranks 14th of the 80 cities rated in the 2023 Emerging Trends in Real Estate report by PwC and Urban Land Institute. Will it be somewhat bumpy over the near future? Probably so. However, our markets will endure and my hope is we will emerge from this uncertainty stronger and more balanced than before.