Houston - (July 11, 2025) - The Houston housing market saw mixed signals in July 2025. While sales volume softened slightly, inventory continued to climb, giving buyers more leverage. Mortgage rates dipped slightly from last month, but affordability remains a major issue, especially for mid-range buyers. Let’s dig into the latest trends across single-family homes, townhomes, rentals, and interest rates to see what this means for you.
Overall, Houston's market is pivoting from the aggressive seller's market we've seen over the past few years. With more listings, longer selling timelines, and shifting buyer preferences, we're seeing an essential balancing act that could shape the rest of 2025.
Key Highlights:
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Single-family home sales dipped 1% year-over-year, with rising inventory boosting buyer leverage.
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Median sale prices dropped across both single-family homes (-3%) and townhomes/condos (-3%).
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Inventory surged, with single-family homes reaching 5.4 months (up 38%) and townhomes/condos climbing to 8.5 months (up 34%).
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Mortgage rates averaged 6.72% in July, slightly down from June but still restricting buyer affordability.
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Rental activity remained steady, with a 3% increase in leases but longer leasing timelines.
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Entry-level homes under $250K saw increased buyer demand, while homes priced above $500K faced more negotiation pressures.
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SINGLE-FAMILY HOMES UPDATE
Sales for single-family homes in Greater Houston dipped 1% year-over-year, with 7,074 homes sold in July 2025 compared to 7,144 last July. The median sale price fell 3% to $345,000, while the average price slipped 2% to $445,595.
The most significant shift is in inventory, which jumped 38% to 5.4 months, a strong signal that the market is moving further into buyer-friendly territory. Homes also sat on the market longer, with average Days on Market increasing from 64 to 75 days.
This cooling pace allows buyers to be more selective, negotiate closing costs, and request repairs—a luxury that was nearly impossible just a year ago. For sellers, the message is clear: price strategically or risk sitting on the market for months.
Single-Family Sales by Price Segment
The luxury market remains steady, but the sweet spot for activity is shifting downward. Rising mortgage rates have made the $250K to $499K segment more sensitive, while entry-level homes under $250K are seeing renewed buyer competition.
If you're considering selling, understand where your home fits into this shifting demand curve. Homes priced above $500K will need standout features, compelling pricing, and polished marketing to compete.
For buyers, patience and preparation are key. The increase in listings means more options, but desirable homes in affordable price points will still move quickly.
TOWNHOUSE / CONDOMINIUM UPDATE
The townhouse and condo segment also showed signs of slowing. Sales fell 6%, and the median sale price dropped 3% to $217,500. Average prices were up slightly, suggesting some higher-end closings, but the broader trend points to buyer hesitation.
Months of inventory surged to 8.5 from 5.6 last year, a 34% increase, while Days on Market jumped to 93 days, a 22% rise. Sellers in this segment need to be patient or flexible with pricing.
Urban properties, especially condos, are feeling the pinch as buyers seek out single-family homes with more space. However, for first-time buyers or investors, this segment offers opportunities to negotiate favorable terms. Expect more seller concessions, from closing cost assistance to minor upgrades.
MORTGAGE INTEREST RATES TREND
The average 30-year fixed mortgage rate in July 2025 was 6.72%, down from 6.82% in June and 6.89% in May. While it’s a modest relief, rates are still historically high compared to pre-2022 levels.
Throughout July, rates ranged from 6.67% to 6.81%. Buyers waiting for a big drop may need to reconsider, as experts don’t forecast sub-6% rates anytime soon.
Mortgage rates are the number one affordability hurdle in Houston right now. A $350,000 home at a 6.7% rate feels dramatically different in monthly payments than it did at 3.5% a few years back. Buyers are either adjusting their budget downward or delaying their purchase entirely.
For sellers, understand that buyers are stretching every dollar. Incentives like rate buy-downs or offering to cover closing costs are strategies that can help make a deal happen in this environment.
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RENTAL MARKET UPDATE
Rentals remain active, with leases up 3% year-over-year. Median rent stayed flat at $2,150, while average rent slipped 2% to $2,289. Notably, Days on Market increased 10% to 46 days, indicating slower tenant activity.
The rental market's slight cooldown is due in part to an influx of new inventory, with many would-be buyers opting to rent longer due to mortgage rate pressures. This has created a balancing act where demand is high, but tenants have more options, leading to longer leasing timelines.
Landlords who adjust quickly—whether with modest price reductions or offering concessions like free parking, reduced deposits, or flexible lease terms—are seeing stronger results.
AIRBNB MARKET DOWNTURN IN HOUSTON
The short-term rental market, particularly Airbnb properties, has seen a noticeable decline in profitability and occupancy rates across Houston in 2025. Investors who once relied on high nightly rates and steady expat, tourist or medical leave flow are now facing extended vacancies and compressed margins.
Several factors contribute to this downturn:
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Poor Customer Experience & Safety Risks: Increased reports of inconsistent service, safety incidents, and lack of professional management have hurt Airbnb's reputation, deterring repeat guests and leading travelers to opt for hotels or professionally managed rentals.
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Oversaturation: Houston saw a boom in Airbnb listings from 2021 to 2023. The influx of new hosts has flooded the market, diluting occupancy and forcing price cuts.
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Increased Regulations: Some Houston neighborhoods have implemented stricter short-term rental ordinances, limiting permissible locations and adding compliance costs.
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Shift in Traveler Behavior: Tourists and business travelers are favoring extended-stay hotels or professionally managed vacation rentals over amateur-hosted properties.
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High Operating Costs: Rising property taxes, utilities, and cleaning fees are eating into host profits, making it harder for smaller investors to stay competitive.
For Houston investors, this downturn means reassessing the viability of Airbnb as a primary income strategy. Properties that once generated $5,000 a month in peak season are now struggling to hit $3,000.
Should you still invest in the BnB model in Houston today? The answer is nuanced:
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Yes, if you can operate in high-demand areas like Medical Center, Downtown, or Montrose, and you're prepared to offer a professional-grade guest experience.
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No, if you're banking on passive, low-effort returns in oversupplied suburban zones.
Successful short-term rental investments in 2025 require operational efficiency, aggressive marketing, and a shift toward mid-term stays (30-90 days). For many, pivoting to traditional long-term rentals or hybrid strategies may be more sustainable.
INDUSTRY NEWS
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New Midtown Development: Construction began on a mixed-use project near the METRORail featuring over 300 residential units, ground-floor retail, and co-working space. Completion is set for late 2026.
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Katy Boardwalk Expands: The city approved phase two of the Katy Boardwalk District, adding more residential towers, boutique shops, and additional restaurant space. This development is expected to further boost the area's livability and attract more residents seeking a live-work-play environment.
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Montrose Gets Zoning Update: A new overlay district is under review to allow more multi-family conversions on formerly single-family lots. This could significantly increase density and reshape the character of Montrose, offering opportunities for developers and investors alike.
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Houston's Infrastructure Plan Gains Funding: The city secured additional state funding for infrastructure improvements across key inner-loop neighborhoods. The upgrades focus on flood mitigation, public transit access, and pedestrian-friendly redesigns.
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Energy Corridor Office-to-Residential Conversions: Several aging office buildings in the Energy Corridor are being eyed for conversion into residential apartments, responding to shifting work-from-home trends and housing demand.
PREDICTIONS
Expect continued shifts toward a buyer’s market through the fall, especially if inventory keeps climbing. Sellers in the $500K to $1M range may need to adjust expectations. First-time buyers and investors will likely focus on the $250K and under segments.
In the townhouse and condo market, expect sellers to get more aggressive with concessions to attract buyers. Urban properties might see creative financing strategies like assumable loans or hybrid rent-to-own offerings.
Mortgage rates are expected to hover between 6.5% and 6.9% into Q4 2025. Barring significant economic shifts, major rate drops are unlikely. However, any small dip can spark renewed buyer interest, so be prepared to act quickly.
Rentals will stay competitive but won't see drastic rate hikes. Inventory will continue to build as developers complete multifamily projects, giving tenants more bargaining power.
For sellers, the formula is simple: price right, present well, and stay flexible. For buyers, this is a window of opportunity to shop carefully, negotiate terms, and capitalize on expanded inventory.
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