Houston Real Estate Market Report: Winter 2023–2024

Something changed in December. Not in the data — the data still shows a slow market — but in the conversation. The Fed’s December dot plot showed three rate cuts projected for 2024, and the market ran with it. Futures pricing at the CME Group FedWatch Tool tool briefly showed expectations for six 25-basis-point cuts in 2024, starting as early as March. Freddie Mac rates pulled back from the October peak of 7.79% to 6.61% by December 28th. And buyers who had been completely absent from my conversations started calling again.

Houston Association of Realtors (HAR)’s December report is still backward-looking and shows the slow market of fall: closed sales down 14% year over year, months of supply at 3.2, days on market averaging 52. But the January showing activity I am observing in real time does not match that data. The forward-looking market — what buyers are doing right now in February — is noticeably more active than what the December numbers describe. Houston is setting up for a spring that is better than 2023. How much better depends on whether the rate expectations hold.

The Rate Cut Optimism Problem

I want to flag something that I think buyers need to hear: the futures market has been wrong about the Fed repeatedly during this cycle. In January 2023 the market was pricing in cuts by summer 2023. They did not come. Now the market is pricing in six cuts in 2024 starting in March. That may be right. It also may be too optimistic by a significant margin. Consumer Price Index (CPI) for December came in at 3.4%, which is above the 3.1% of November and a reminder that the last mile of inflation reduction is historically the hardest. If cuts are delayed again, the buyers who came back to the market in January and February because they expected a rate-cut spring will face a rude surprise.

My advice to buyers right now: make your decision based on current rates, not on forecast rates. If you can buy comfortably at 6.75% and a rate that is meaningfully lower would be a bonus, proceed. If you are buying only because you expect rates to be at 5.5% by summer and you need that to make the purchase work, you are taking on risk that the market’s current pricing does not adequately reflect.

What Spring Is Setting Up

In the northwest corridor I am seeing early green shoots. Showing requests in Bridgeland and Marvida are up from December lows. Buyers who had been waiting are scheduling tours. I think the spring 2024 market in the master-planned communities will be meaningfully more active than spring 2023, even if rates do not fall as dramatically as the futures market implies. The pent-up demand from buyers who have been sidelined for twelve to eighteen months is real, and life circumstances — families growing, leases ending, job changes — have accumulated into a pool that is ready to act on any reasonable improvement in conditions.

Federal Housing Finance Agency (FHFA) raised the conforming loan limit to $766,550 for 2024, which opens conventional financing to a slightly higher price tier than before. Texas State Affordable Housing Corporation (TSAHC) and Texas Department of Housing and Community Affairs (TDHCA) program updates for 2024 are worth checking if you are advising first-time buyers — income limits have been adjusted upward in some programs to reflect Houston’s income growth. The City of Houston Houston Homebuyer Assistance Program (HAP) program is worth verifying availability as funding periodically depletes.

My Spring 2024 Prediction

Spring 2024 will be better than spring 2023. I am confident enough in that to say it directly. The question is how much better. If rates settle in the 6.5–6.75% range and the rate cut narrative does not collapse, I think we see closed sales volume up 10–15% from spring 2023 levels and median price firming back toward the $320,000–$330,000 range in Harris County. If the rate cut expectations are disappointed — if the Fed stays higher for longer than the December dot plot implied — the improvement will be more modest, maybe 5–10% volume growth with prices holding flat. What I do not expect: a return to 2022 conditions. That requires a rate environment that is not on the near-term horizon.