Oil Prices, Mortgage Rates, and the Houston Housing Market: What Buyers Need to Know Right Now

The Connection Between Oil Prices and Your Mortgage Rate

If you have been watching mortgage rates and wondering why they have not dropped the way many people expected, the answer right now has less to do with the Federal Reserve and more to do with what is happening with global oil prices. Understanding that connection can help you make a smarter and more confident decision about buying a home in today's environment.

Conflict in the Middle East, specifically ongoing military action involving Iran, has created significant uncertainty around the Strait of Hormuz, a critical passage through which approximately 20 percent of the world's oil supply moves. Disruptions to tanker traffic in that corridor have pushed oil prices sharply higher in recent weeks. At the same time, natural gas supply concerns are adding additional pressure to energy markets globally.

Why does that matter for mortgage rates? Because rising oil prices feed directly into inflation expectations. When investors anticipate that raw material costs and shipping expenses will drive prices higher across the economy, bond yields rise to compensate for that inflation risk. And as Rich at Habayit Home Loans explains, when bond yields rise, mortgage rates follow.

Where Rates Actually Stand Right Now

According to the most recent Freddie Mac interest rate survey, the average conventional mortgage rate came in at 6.11 percent last week, up 0.11 percent from the prior reading. That sounds like meaningful movement but the real-world impact is more modest than the headline suggests.

On a $400,000 mortgage, that 0.11 percent increase translates to approximately $31 per month in additional payment. As Rich points out, the question worth asking is whether $31 a month is a reason to put your homebuying plans on hold, wait for more competition to enter the market as rates eventually drop, and risk paying more for the same home later. For most buyers the math does not support waiting, particularly when a future rate decline creates the opportunity to refinance into a lower payment down the road.

What the Houston Market Is Telling Us Right Now

Looking at the most recent Houston area data, the market is sending signals that deserve a thoughtful read rather than a simple good news or bad news interpretation.

Listings were up approximately 6 percent year over year, which gives buyers more options than they had at the same point last year. Pending listings were down about 8 percent and closings were slightly lower as well, reflecting some buyer hesitation in the current rate environment. Showings, however, were up nearly 7.6 percent, a clear signal that the spring showing season is gaining momentum and buyer interest remains healthy even if some of that interest has not yet converted to contracts.

On the pricing side, the average listing price in February was up 2 percent year over year. The median sales price has dipped slightly while the average sales price has moved higher, a dynamic that reflects more activity at the lower end of the market bringing the median down while higher-priced homes that are selling continue to command strong values.

The Market Is Not Simply a Buyer's or Seller's Market

One of the most common oversimplifications in housing commentary right now is the attempt to label the entire market as either clearly favoring buyers or clearly favoring sellers. The Houston data tells a more nuanced story.

As Rich explains, homes that are appropriately priced for their condition and location are moving off the market with solid activity. Homes that are overpriced are sitting, which is driving up the average days on market statistic that some commentators point to as evidence of a buyer's market. The reality is that both dynamics are operating simultaneously. There are not major bargains hiding in the market because the properties that are selling are the ones priced correctly from the start.

For buyers, this means doing the research matters. Working with professionals who understand current comparable sales and can help you identify well-priced properties is worth far more than trying to time the market based on headline statistics.

The Cost of Buying Is Still Lower Than Last Year

Despite the recent uptick in rates and the ongoing uncertainty around inflation, the total cost of buying a home right now remains meaningfully lower than it was at the same point last year for most Houston buyers. Two factors are driving that improvement. For primary residence purchases, the increase in the homestead exemption has reduced the property tax burden for owners. And even at current levels, mortgage rates are still significantly below where they were a year ago.

That combination means buyers who act now are entering a market where their monthly payment on a comparable home is still lower than it would have been twelve months ago, even accounting for the modest rate increase seen in recent weeks.

What Self-Employed Buyers Should Know

One segment of buyers that consistently faces additional complexity in the mortgage qualification process is the self-employed. Income documentation requirements, the interaction between tax deductions and qualifying income, and the timing of conversations with CPAs can all significantly affect what a self-employed buyer is able to qualify for.

Rich at Habayit Home Loans is hosting a webinar specifically designed for self-employed buyers and real estate professionals on March 26 at 7 PM to walk through the different ways self-employed borrowers can qualify for a mortgage. Importantly, the conversation about mortgage structure needs to happen before you meet with your CPA for tax preparation, not after, so that you can make informed decisions about deductions and income reporting without inadvertently limiting your purchasing power.

Registration is available at savewithrich.com.

The Bottom Line for Houston Buyers Right Now

Global energy markets are creating uncertainty around inflation and keeping mortgage rates elevated in the near term. But the Houston housing market remains fundamentally healthy, appropriately priced homes are moving, and the overall cost of buying is still favorable compared to where it stood a year ago.

Rich at Habayit Home Loans works with Houston buyers to navigate the current rate environment with clarity and a strategy built around their specific situation. Reach out to Rich to get your questions answered and build a plan before the spring market gets fully underway.

Sources

FreddieMac.com FederalReserve.gov HoustonAssociationOfRealtors.com CNBC.com EnergyInformationAdministration.gov