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Constrained inventories, rising mortgage rates, declining affordability slow Texas housingConstrained inventories, rising mortgage rates, declining affordability slow Texas housinghttps://www.recenter.tamu.edu/news/newstalk-texas/?Item=259562021-05-24T05:00:00Z2021-05-24T14:00:00Z

​​​​COLLEGE STATION – Texas’ housing boom lost momentum in April as existing homes sold through Texas Multiple Listing Services (MLS) ticked down 0.8 percent month over month.

"While Texas housing sales may recover to January peak levels, we do not expect activity to maintain its double-digit annual rate of increase in the long term," said Dr. Luis Torres, research economist for the Texas Real Estate Research Center at Texas A&M University. 

One restriction of the Texas housing market is the severe lack of inventory for sale.

"The number of new MLS listings rose for the second straight month in April, but Texas’ months of inventory remained less than 1.3 months," according to Torres. "For homes priced less than $300,000, which constitutes three-quarters of total sales, only one month of inventory was available. In the major metros, inventory was even more constrained."

Torres noted that the median credit profiles of Texas borrowers improved during March, reflecting the fact that only the most qualified housing applicants are able to outbid their competition for their desired homes in a period of exceptionally tight inventories and strong housing demand.

In addition to depleted inventory, national mortgage-interest rates have crept up in the past few months from a series trough of 2.68 percent in December 2020 to 3.06 percent in April.

Torres notes that mortgage rate fluctuations within Texas reflected the trend in national data. Combined with double-digit home-price appreciation, income growth cannot keep up, threatening housing affordability.

"Our Texas Repeat Sales Home Price Index, which accounts for the fact that the sales composition is shifting toward higher-priced homes due to lack of inventory at the bottom price cohorts, corroborated substantial and unsustainable home-price appreciation of 10.4 percent annual growth during 1Q2020," said Torres. "Meanwhile, the Center’s Home Affordability Index revealed housing affordability declined in Austin, Fort Worth, and Houston over the past three months relative to 4Q2020."

According to the National Association of Realtors, existing-home sales fell for the third straight month in April, decreasing 2.4 percent. Potential homebuyers across the country are experiencing many of the same challenges Texas buyers face – diminished inventory, rapid median-price growth, and tough competition for what homes are available for sale.

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