Houston - June 12, 2025) - The Houston housing market delivered a mixed performance in May 2025. While some areas held steady, others experienced sharp changes that signal evolving buyer and renter behavior. High mortgage rates continue to test affordability, while rental prices and inventory levels climb. Single-family homes saw little change in sales volume or pricing, but signs of cooling are becoming harder to ignore: listings are lingering longer, and inventory has jumped.
On the flip side, the condo and townhouse sector faced a noticeable slowdown, with sales, prices, and volume dropping. The rental market told a different story entirely, with surging average rents hinting at demand from would-be buyers who remain on the sidelines. Meanwhile, new development projects and city infrastructure improvements continue to reshape the landscape of Greater Houston.
Whether you're buying, selling, or investing, these trends are worth watching closely. Let’s dive into the numbers and insights that defined the month.
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Key Highlights
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Single-family home sales and prices held steady, but rising inventory and longer days on market signal a cooling trend.
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Condo and townhouse sales fell 18%, with a 27% drop in dollar volume and a 10% decline in median price.
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Homes under $250K saw the strongest demand, with double-digit growth in the most affordable price segments.
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Mortgage rates rose to 6.89% in May 2025, the highest point in the past 12 months.
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Average rent prices surged 43%, pointing to increased demand for premium rentals.
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New developments and infrastructure projects are poised to reshape key neighborhoods like Montrose and areas near Hobby Airport.
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Buyers now have more options; sellers must stay competitive and strategic.
Single-Family Homes Update
The single-family home market remained steady on the surface but showed clear signs of softening underneath. Total sales and pricing held their ground, with both median and average prices showing minimal movement. However, an increase in inventory and longer days on market suggest a cooling trend.
The 36% jump in inventory from 3.3 to 4.5 months means more options for buyers, but potentially more competition for sellers. Homes are also taking longer to sell, with average days on market rising to 75. This combination often indicates a shift toward a more balanced or buyer-friendly market. Sellers should be prepared to negotiate and price their homes competitively, while buyers may find increased leverage in upcoming months.
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Single-Family Sales by Price Segment
The breakdown by price range reveals diverging buyer behavior. At the high end, luxury home sales increased by 4%, likely driven by affluent buyers who are less sensitive to interest rate fluctuations and more motivated by lifestyle upgrades. These buyers may also be looking to capitalize on inventory before potential price rebounds.
In the middle price brackets ($250K-$999K), activity dipped slightly. These segments typically include move-up buyers and many financed purchases, which are more affected by mortgage rate increases. Many buyers here are pausing or adjusting budgets in response to higher monthly payments.
The most notable growth occurred at the bottom end of the market. Sales of homes under $250K surged, with a 16% increase in the sub-$149K range and 8% growth in the $150K to $249K range. This reflects a push for affordability as buyers seek lower-cost options in an increasingly expensive landscape. It could also indicate a wave of first-time buyers entering the market, or investors targeting properties with rental potential.
As demand shifts, expect builders and sellers to pay closer attention to this lower price tier in the months ahead.
Townhouse / Condominium Update
The condo and townhouse market is facing notable challenges. Sales volume dropped 18%, indicating fewer buyers are transacting in this segment, possibly due to rising interest rates, increased HOA fees, or lifestyle preferences shifting toward single-family living. Meanwhile, a 27% drop in dollar volume and a 10% decline in median sales price underscore weakening demand and reduced willingness to pay premium pricing for multifamily units.
Inventory climbed to 7.4 months, a nearly 40% increase year-over-year, and days on market stretched from 71 to 90. These are classic signs of a softening market where buyers hold more negotiating power. It may take longer for sellers to attract offers, and pricing strategies will need to adjust accordingly.
For buyers, this presents an opportunity to explore better deals, especially in desirable neighborhoods where condos have traditionally been priced aggressively. For sellers, it may be time to invest in cosmetic updates or staging to help listings stand out. Watch this segment closely, especially if interest rates begin to level out or decline—as that could renew activity.
Why Condo and Townhouse Sales in Houston Are Plummeting
Mortgage Interest Rates Trend
Mortgage rates climbed from 6.72% in May 2024 to 6.89% in May 2025, peaking after a steady increase through the spring. While the increase may appear modest on paper, the reality for buyers is substantial—every fraction of a percent can significantly impact monthly payments, reducing purchasing power or altering loan qualification thresholds.
This rate environment has led to a more cautious buyer pool, particularly among first-time and FHA borrowers, many of whom are already stretched by inflation and high home prices. Mid-range buyers, too, are either lowering their budgets or pausing entirely, hoping for potential relief later in the year.
Lenders are responding by promoting buydown options and adjustable-rate mortgages (ARMs), while some sellers are starting to offer concessions to offset higher financing costs. Additionally, we're seeing longer days on market as higher rates give buyers more time to shop, compare, and negotiate.
The market is watching the Federal Reserve closely. If inflation moderates and rate hikes pause, we could see stabilization—or even slight rate decreases—by late summer or early fall. Until then, affordability challenges remain front and center.
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Rental Market Update
While rental volume stayed flat, average rent prices spiked 43%, signaling a substantial shift in the leasing landscape. This surge in pricing suggests strong demand for high-end rental units, particularly in central Houston neighborhoods where premium amenities and location convenience justify steeper price tags. The increase in average rents outpaces the modest 1% gain in median rent, highlighting that the top-tier segment is driving most of the growth.
This trend may be fueled by would-be homebuyers who have postponed purchasing due to high mortgage rates and limited inventory in their price range. Instead, they’re opting for upscale rentals while waiting for better buying conditions. Additionally, corporate relocations and short-term professionals may be contributing to demand for furnished and amenity-rich rental units.
The rise in average days on market—from 48 to 54—shows that while demand remains strong, tenants are taking slightly longer to make leasing decisions. This could reflect more inventory hitting the market, or a hesitancy among renters facing higher monthly commitments.
For landlords and investors, the data suggests an ideal time to reevaluate pricing, upgrade units, or consider entering the high-demand luxury rental market. For tenants, acting quickly on competitively priced units may become increasingly important, especially as summer leasing activity peaks.
Industry News
1. Montrose Development Expands
A new mixed-use development is breaking ground in Montrose featuring retail, luxury rentals, and green spaces. This adds appeal to one of Houston's most walkable areas. With Montrose already known for its arts scene, local eateries, and diverse housing stock, this project is expected to increase foot traffic, raise nearby property values, and add even more demand for nearby rentals and homes for sale. Investors and buyers looking for long-term appreciation may find Montrose particularly attractive over the next few years.
2. Hobby Airport Modernization
Phase two of the Hobby Airport expansion is underway, adding more gates and amenities to support growing passenger traffic. These improvements will increase connectivity and convenience for South Houston residents and travelers. For real estate, this project is expected to make nearby neighborhoods more attractive to out-of-state buyers, traveling professionals, and short-term renters. Expect a rise in development interest and potential appreciation in surrounding areas such as Glenbrook Valley and Meadowbrook.
3. Statewide Tax Appraisal Protests
Homeowners across Harris, Fort Bend, and Montgomery Counties are filing record numbers of protests after significant appraisal hikes. This surge is partly due to rising home values over the past few years, but also because counties are under pressure to fund school and infrastructure budgets. In some areas, appraisals have increased as much as 20–30%. Property owners are advised to review their tax assessments carefully and consider filing protests before the summer deadlines. This wave of protests could signal a shift in how property taxes are evaluated and could affect buyer decisions in high-tax areas. are filing record numbers of protests after significant appraisal hikes.
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Predictions for Summer 2025
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Inventory Will Continue to Rise: As homes sit longer on the market, expect even more listings and price adjustments by mid-summer.
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First-Time Buyer Momentum: Affordable housing demand will keep growing, especially under $250K. Builders may start reintroducing entry-level product.
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Rentals Remain Strong: Renters unable to buy will fuel ongoing strength in the leasing sector, especially in inner-loop areas.
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Mortgage Rate Plateau: Expect rates to hover near current levels through the summer barring major economic shifts.
Looking to make a move this summer? Reach out for a personalized game plan that aligns with the current market dynamics.
Sources: Houston Association of Realtors (HAR), Freddie Mac, City of Houston Planning Department
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