In 2022, those conditions have slowed, but not yet abated, experts said.
The market has grown more expensive in Sugar Land and Missouri City with a 19.54% year-over-year increase in the price of single-family homes in Fort Bend County in April, according to data from Texas A&M University’s Texas Real Estate Research Center.
“The Sugar Land market is still hopping,” Keller Williams Realtor Sapana Patel said. “Some of the things that were happening last year—people standing in lines outside an open house waiting for it to start—that’s not really happening anymore. But there’s still low inventory. So it’s still a very strong seller’s market.”
Another indicator of demand—the average days on the market—has also seen significant declines across five ZIP codes in the Sugar Land and Missouri City area, according to data from Sparrow Realty Alina Rogers. In ZIP code 77498—which runs along Hwy. 6, north of Hwy. 90—homes were on the market an average of 23 days between June 2021-May 2022, a 61% decrease from the year prior.
Texas Real Estate Research Center data shows Fort Bend County’s housing inventory remains at around the lowest it has ever been at a 0.9-months supply. Kunal Seth, a local Realtor with The Seth Brothers Team Realty firm, said inventory below three months in the Sugar Land and Missouri area is a seller’s market.
Low inventory is also hitting homebuyers as mortgage rates are on the rise, hitting 5.81% on June 23, before a fall to 5.3% on July 7. Currently, on July 14, that rate was 5.51%, according to the Federal Home Loan Mortgage Corp., commonly known as Freddie Mac. That is the highest level since 2008 in the midst of the Great Recession.
Adam Perdue, a research economist from the Texas Real Estate Research Center, said the county’s low inventory goes hand in hand with rising home costs. In Fort Bend County, the average single-family housing price grew from $401,070 in May 2021 to $476,226 this May, according to the center’s data.
“There’s just not many houses available anymore,” Perdue said. “Pricing increases are accelerating still. What that shows is that demand is still strong, while recent closings that are falling is because there are not as many houses left.”
Yet experts said homebuyer demand remains strong, especially within certain neighborhoods of Fort Bend County, such as the Sienna master-planned community along with Glendale Lakes and Parks Edge, which are set to add over 7,000 new homes by 2031 to meet the demand.
Rising rates
The low inventory and the high demand mean not every potential homebuyer is able to purchase the first home they place an offer for, and some have either been unable or unwilling to win a bidding war, experts said. Others have simply been priced out.
“Buyer fatigue and also the interest rate are not helping homebuyers because the change of interest rate will change their monthly payment,” said Serena Chu, a Realtor with Keller Williams who focuses on rental properties. “Buyers started to doubt and started to get worried and concerned, so some said, ‘You know what, I’m just going to rent, and I’ll wait out the market.’”
This sentiment comes as the national 30-year fixed-rate mortgage hit 5.51% on July 14, according to Freddie Mac. While low compared to historic rates like the 18% mortgage rate the country faced during the 1981 recession, mortgage rates have gone up almost three percentage points since January 2021, when the rate dropped to 2.65%.
That means at a 5.51% 30-year fixed mortgage rate and a home price of $476,226, a homeowner with a 20% downpayment would need to pay $2,189 per month on their mortgage, according to financial technology company Smartasset.com’s mortgage calculator. In January 2021, that same homeowner would have needed to pay $1,552 per month on their mortgage.
Meanwhile, the demand for single-family rentals across the Greater Houston area reflects that growing homebuying hesitation. A June 15 report from the Houston Association of Realtors showed 3,406 renters leased out single-family homes in May—a nearly 25% increase compared to the prior year.
A 2022 Consumer Sentiment and Home Affordability Survey from the HAR, released in May, revealed of 600 survey respondents across the Greater Houston area, the 79% who stopped searching for a home said they did so because they were priced out of the market, 62% because there was not enough inventory and 29% because of an increase in the mortgage rate.
This comes as the HAR reported the median monthly price for single-family rentals in the Houston area went up 8.1% year over year to $2,000 per month.
The average rent for one-bedroom apartments in Sugar Land reached $1,250 per month as of June 15, according to data from Zumper.com, a platform that tracks apartments available for rent. That is the highest rent rate across eight cities in the Houston area, above cities such as Houston and Pearland, which charged renters on average $1,200 per month.
Higher rents are why 70% of renters who responded to the HAR survey said they are likely to purchase a home in the next two years.
“If people think that it makes more sense to buy, those renters will advance as homeowners, and then the rental market will slow down a little bit,” Chu said.
Market effects
To take advantage of lower mortgage rates, homebuyers had been pushing their home purchases years ahead of their initial buying schedule, but rising rates are giving home buyers more pause, Seth said
In addition to buyer hesitancy, low inventory and rising home prices mean the number of homes available at lower prices has greatly diminished, Patel said.
According to price distribution data for Fort Bend County from the Texas Real Estate Research Center, 21.1% of homes sold in Fort Bend County in 2020 were priced between $200,000-$249,999. In 2021, that dropped to 10.8%.
Still, the housing demand remains very strong across the board, and in communities such as Sienna, home construction demand has posed a challenge for builders, who struggle to meet that need given continuous supply chain interruptions, said Alvin San Miguel, vice president and general manager of Sienna.
Nationwide numbers paint a bigger picture of the challenges faced by the homebuilding industry. According to Freddie Mac, there were 1.64 million new homes under construction nationwide in April, the highest on record. Locally, in eight counties across the Houston metro, including Fort Bend County, that figure is about 21,000 as of June 15, said Lawrence Dean, senior vice president of advisory at Zonda, a real estate research firm.
“That’s the most new homes under construction we’ve ever seen,” Dean said. “Across the last year and a half, it’s taken homebuilders longer to build due to labor constraints but even more so constraints on building materials.”
Sienna, which had more than 10,200 occupied homes as of June 15, plans to build another 5,290 single-family units by 2031, according to February projections from demographer firm Population and Survey Analysts.
New home builds are designed to meet the population demand in Fort Bend County as the county projects its population will reach 1 million residents by 2027.
Amenities, more space and a better community feel are some of the reasons why people are moving out to Fort Bend County, San Miguel said.
“Over the years, I think residents and potential buyers enjoy the suburban setting,” San Miguel said. “They are close to many employment centers in Houston, and the Fort Bend Toll Road that ties into the northern part of the community is just a mere 20-minute drive into Houston with no lights.”
Fort Bend ISD, which oversees seven schools in the Sienna community—including one high school, two middle schools and four elementary schools—keeps an eye on housing and population growth in communities such as Sienna and implements strategies such as rezoning to ensure its schools do not become overcrowded, FBISD Deputy Superintendent Steve Bassett said.
To address future growth needs in the district, FBISD will look to add additional schools in the Sienna and FM 521 corridor, Bassett said.
“We’re looking at having two elementaries in our bond package that we’re putting together for 2022,” Bassett said. “We are trying to stay ahead of the game and getting those elementaries in place before the kids really need it.”
