The Houston area experienced record home sales in 2021, and economists and real estate brokers believe the market will remain strong this year despite the Federal Reserve's plan to start raising interest rates in March.

The demand for housing will continue as people keep moving to the region, said Patrick Jankowski, Partnership Senior Vice President of Research.

Jeremy Fain, a broker associate with Greenwood King Properties, echoed that sentiment. He expects there will be buyers despite higher interest rates.

"I think there may not be as many of them in the price points [or] brackets they were in a few months ago, but I think as long as we have a lack of inventory, it's still going to be busy," Fain said. 

The Fed wants to raise interest rates in hopes of slowing down inflation. The central bank has not announced how many times it will raise interest rates, but economists predict it could be at least four times this year. 

According to John Burns Consulting, interest rates on a 30-year conventional mortgage have already jumped 100 basis points since January 2021. Jankowski said he expects the rate to increase by at least 1% next year.

"One percent doesn't seem like much, but when you're looking at a house that's $300,000 or $350,000 that could add as much as $200 to $250 to your monthly note," he said.

Fain and Bernstein Real Estate Owner Amy Bernstein agree that the market is currently in a "frenzy," partly due to talks about higher interest rates. People wanting more space and a home office, as well as millennials entering the housing market, have also contributed to the increased demand. 

"Anything that comes on the market right now, if it's priced correctly, will get bought up almost immediately by multiple offers. I have never, ever experienced a market like this," said Bernstein, who has been in the market for 40 years.

According to Bankrate, the 30-year mortgage rate is currently 3.78%.

Fain, Bernstein and Jankowski remind homebuyers that interest rates will remain relatively low, especially compared to the 1980s when they hovered around 10% to 16%.

In 2021, Houston-area realtors sold 106,184 single-family homes, up 10.3%from the same period in 2020. The median sales price for a single-family home rose to a record high of $319,000 in December 2021 from $263,000 in January 2021. 

According to Jankowski, the cost of housing will only increase but not as sharply as last year. As a result, buyers should prepare to potentially buy a smaller home, buy in a less desirable neighborhood or put down a larger down payment.

"If they wait six months to a year, they may not be able to get into a house at all without a substantial increase in income or a larger down payment," he said. 

Read the Partnership’s latest reports on home sales and the economy.