Learn more about the housing market in Texas

Every state is unique when it comes to the real estate market, and the TX housing market is no exception. That’s why it’s critical to understand the market you live or operate in. Whether you’re renting, buying, or selling, it will impact many aspects of your life. 

Texas Housing Market Overview 

Texas has a historically robust housing market. The state’s favorable weather, active lifestyle, and sunny neighborhoods have attracted movement into Austin and other Texas cities from more expensive cities like Seattle, Los Angeles, and San Francisco. Inventory climbed substantially in recent years to meet the booming demand. In fact, during 2021, Texas saw record year-over-year home price increases. It was the place to be.  

Today, inventory in Texas is back over pre-pandemic levels, so the market is cooling a little bit. Experts say the market was unsustainably hot, so it makes sense houses aren’t “flying off the shelves” anymore.  

Austin and Houston are two examples of areas impacted by the market correction. Sellers are cutting asking prices by as much as 30% to sell their Austin homes. In fact, the city experienced the most aggressive house price drops anywhere in the country between summer of 2022 and spring of 2023. Per Zillow’s data, Austin prices dropped by 10.2%, which was well below the national average of 1% in the same time span. Houston, on a similar path as its fellow Texas city, ranked sixth nationally for decreasing homebuying demand between April 2023 and April 2024 (per Redfin). 

Home prices in Austin, and elsewhere in Texas, are finding their way back, though. According to Redfin’s data, the median sale price has continued to increase since March. As of May in 2024, It’s important to mention that median sales price in Houston and Austin both saw increases over 3% year-over-year.  

The housing market in Texas is an outlier in the sense that supply increased while declining in the rest of the U.S.  

Texas Real Estate Market Trends 

To understand the housing market Texas operates within, it’s important to keep up with trends. Let’s look at some key ones in Texas. 

Note: These statistics are based on Redfin’s monthly housing data from May 2024. 

Median Home Price 

Texas’ median sale price is $357,700, according to Redfin’s monthly housing market data. This is a growth of about 1% since May of last year. However, median prices in larger cities like Austin, at $585,000, and Dallas at $499,900 are much higher than that figure, while prices have skyrocketed in cities like Highland Park ($2.5 million) and West University Place ($1.8 million). A report from Harvard found that Texans struggling mightily with home and rental prices is at an all-time high.  

Number of Homes Sold in May 2024 

The number of homes sold in Texas in May was 31,359, down 6% from last year according to the Redfin dataset. This metric gives us a good picture of the current sales volume in Texas. It’s also important to keep in mind that this number might be inflated compared to other months since nationally speaking, sales usually peak during the spring and summer months and slow in the winter. In fact, the National Association of Realtors (NAR) predicts that in February and March alone, sales activity increases by as much as 34% and prices by 3%. 

Median Days on Market (DOM) 

Days on market (DOM) is a measure of the average length of time a home remains listed on the market before being put under contract. A lower DOM signals a highly competitive seller’s market with more pressure on buyers to make higher offers and remove contingencies. A higher DOM signals a buyer’s market as sales are slower and sellers have less leverage. 

The current median DOM in Texas is 41 days. This is above average compared to other states, and the state’s larger inventory means that this is a buyers’ market, a rarity among states in America right now. 

New Supply Statistics 

Housing supply in Texas is increasing, which could lead to more housing opportunities and ease the financial burden of renters and homeowners in the state. The state currently has four months of supply, which is more than most other states in the U.S. Texas is one of the states with more new housing supply in recent years, suggesting more availability of homes and an ease in prices is already taking place. 

Property Tax Rate 

The average property tax rate in Texas is 1.68%, according to Rocket Mortgage. This places Texas’s average property tax rate as the 6th highest in the U.S. However, keep in mind that property taxes vary widely depending on the specific county of Texas and the value of the home. 

Foreclosure Rate in Q1 of 2024 

In the first quarter of 2024, 1 in every 1,399 homes in Texas experienced a foreclosure filing (according to recent data from ATTOM). Based on this data, Texas’s foreclosure rate is on the higher end relative to the rest of the nation. 

Hottest Local Markets in Texas 

Texas has several hot urban markets. Here are three of the most noteworthy: 

1. Dallas

Dallas is the ninth-largest city in America. It’s a modern metropolis with a vibrant arts scene, an active nightlife, an iconic cowboy culture, and a myriad of dining options. Its strong local economy is bolstered by a booming job market (4% rise in additional jobs in 2023, which was second most in the nation last year). 

The housing market is in an interesting place in Dallas. It’s robust, yet turbulent. The data displays this conflict as median home prices went up almost 21% year-over-year, but the number homes sold fell almost 9% year-over-year and homes with price drops increased around 10%. It’s a somewhat balanced market, though, with a DOM of 31 days. 

House prices outpace income in Texas (as with many other states), which makes home ownership less attainable for a larger portion of the population. This is a mounting issue in Dallas and much of the country.  

2. Houston

Houston is the fourth-largest city in America and a Southern staple. It’s known for the Space Center Houston, a vibrant arts and history scene, and busy fine dining. 

April of this year seems to indicate sellers and buyers are adapting to the new reality in Houston. Total property sales in Houston increased 8.7% from April 2023 to April 2024 (per Houston Association of Realtors’ Multiple listing Service). Inventory increased around 48% from May 2023 to May 2024.  

3. Austin

Like many of its Texan city counterparts, Austin experienced a housing boom during the COVID-19 pandemic. Now, though, many local real estate agents believe the market is returning to normal. 

A combination of factors, including higher mortgage rates, fewer residents moving in from more expensive areas of the country, declining investor interest, and an increase in new construction, are responsible for the market shift. The price shifts aren’t uniform across the city, though. While the west experienced extreme price changes, areas like the suburbs also experienced price declines, just at a different rate.  

As of May 2024, Austin has a median home sale price of $585,000 (per Redfin data), which is still up 3.5% year-over-year. That said, the total number of homes sold declined 11.5% year-over-year. And, with a DOM of 42 days, this is clearly a buyers’ market right now. 

Factors Impacting the Texas Housing Market 

The housing market Texas is home to is influenced by macroeconomic trends and more granular economic factors specific to the state. 

Mortgage Rates 

High mortgage rates are a continuing challenge for would-be homeowners in the U.S. Texas’s average rates for 30-year mortgages in May of 2024 are right around the national average at 7.06%. Higher interest rates deter borrowing and discourage those who already own homes from putting their homes on the market. Many homeowners report feeling “locked in” to their current homes, as it is unlikely they will secure a mortgage rate as low as their current one on their next property. Prospective buyers in Texas should monitor mortgage rates in the coming months for a better understanding of how they impact the housing market. 

Inflation and Cost of Living 

Mortgage rates are tied to inflation, another massive contributing factor to the affordability of housing and the state of housing markets in general. Inflation has increased the cost of living for many across the U.S., including in Texas. This means fewer people can truly afford to limit housing costs to less than 30% of their monthly income.  

Population Changes and Demographics 

Intraregional The population in the Lone Star state increased every year between 2010 and 2022. It was an incredibly popular place to move to during and right after the height of the pandemic. As we mentioned earlier, things cooled off a bit recently, but that doesn’t mean people are no longer interested in living here. 

As of March 2023, Texas was one of two states with over 30 million inhabitants (the other being CA). Texas, in contrast to Florida’s predominantly domestic migration, had moderate increases across various components of population change.  

From 2000 to 2022, Texas’ population increased by over 9 million people. This 43% rise means Texas was the fourth fastest-growing state in the U.S.  

Other Factors for Texas: Insurance 

The increased likelihood of dangerous extreme weather events make insurance a major factor in the Texas housing market. Homeowners paid $4,142 every year, on average, for insurance in the state. This is $1,541 more per year than the national average. Per S&P Global, Texas home insurance rates rose almost 51% since 2022. 

Texas Housing Market Forecast 

The Texas market balanced out quite a bit recently. It’s not the hot market it once was. Supply increased beyond demand, which is a rarity in America right now. Per Texas housing market predictions (2024) from many experts, demand will stay strong, though, because Texas remains a popular place to live due to a lack of state income tax and reasonable cost of living.  

Over the next five years, most experts expect home prices to grow at a slower rate (around 2% to 4%). Texas outpaced other states considerably in new construction in 2023 and that doesn’t appear to be changing anytime soon (Houston and Dallas were first and second in the country for new construction sales in March of 2024).  

Thus, while the forecast doesn’t have Texas returning to the insanely hot market it once was anytime in the near future, it does appear to be headed to a more balanced market. 

Likelihood of Texas Housing Market Crash  

A housing market crash in Texas is highly unlikely. The job market is healthy with a 4% unemployment rate, and a private sector that grew 2.6% in January 2024 year-over-year (the national average is 2%). Per the Council for Community and Economic Research, the average cost of living in TX is 7% lower than the national average. The average salary in Texas is also just below the national average. 

While a crash isn’t likely, experts believe Texas’ housing market will continue to cool off and balance out. This means sellers won’t be selling for prices anywhere near the pandemic level. Texas’ overall healthy economy, job opportunities, and stricter lending standards than the ones that led to the national crash in 2008 should also help prevent a crash. 

Ultimately, the outlook for Texas’ housing market isn’t promising, but it’s not discouraging, either. There appears to be a semblance of stability, even though predicting the housing market perfectly is always impossible. 

Forecast for The U.S. Housing Market 

Now that we’ve looked at Texas’s housing market, let’s zoom out a little bit. What about the U.S. housing market? What do you need to keep an eye on in the coming years? 

The United States’s current median existing-home sale price is around $384,500 per the National Association of Realtors. The inventory, though, remains low. A balanced market typically has a 5-to-6-month supply, but the current figure is 2.9. 

We’re currently in a seller’s market with buyers looking at continued rising house prices. The same trend can be seen with renters. Housing continues to appreciate, in general.  

Dr. Lawrence Yun, Chief Economist and Senior Vice President of Research, National Association of Realtors, believes the housing market will appreciate 15 to 25% over the next five years. He thinks that the seller’s market will continue because housing inventory will remain low. In five years, however, he predicts a more balanced market, in which neither party has a built-in advantage. Thus, the market will shift to a case-by-case basis to determine what kinds of deals people can get. 

Hybrid work also impacts the housing market. This shift in work culture means suburbia will continue to grow. States like Texas, the Carolinas, Tennessee, and Florida should see continual growth. 

The number of single-family homes built decreased over the past couple years while the number of multi-family homes increased due to lower prices and a demand for affordable housing. Higher mortgage rates and inflation (affecting price of materials) were the main causes.  

Texas Rental Market 

The rental and buying market are obviously closely linked. When home prices fall, landlords are more likely to buy properties to rent out. Home prices and rental prices are correlated as well because a hot market means prices rise.  

Rents were more unaffordable than ever in 2021 and 2022 in the U.S. In 2022, 22.4 million households paying rent said it was unaffordable, which is the highest that figure has ever been, according to a January report from the Joint Center for Housing Studies at Harvard University. The study found that half of all renters in the United States spent over 30% of their income on rent and utilities.  

The markets cooled in 2023, though, due to new units and decelerating demand. But a serious problem persists: Rent increases are still outpacing income gains.  

Moreover, high interest rates are keeping borrowing and transaction activity down. Over half the banks surveyed by the Federal Reserve reported that demand for multifamily loans decreased year-over-year. The pandemic caused a housing disparity that isn’t going away anytime soon. Unaffordable housing is a serious issue across America.  

Texas’s current rental market is influenced by these trends but not dominated by them. Rent in Texas is generally affordable but certainly varies across the state. Below is a snapshot of Texas’s rental market based on data pulled from Zillow: 

Texas Rental Market Key Trends 

• Median rent: $1,975 (note: rent in Texas is 8% lower than the national median) 

• Month-over-month rent change: +$25 

• Year-over-year rent change: +$25 

• Available rentals: 55,076 

Conclusion 

The Texas housing market in 2024 is marked by a blend of stability, changes, and challenges, making it crucial for potential buyers and sellers to stay informed about market trends. Whether you’re looking to purchase a home soon or sell your property in Texas, the macro- and micro- economic trends outlined above will affect your decision-making. Market dynamics like changes in home prices, inventory levels, and interest rates will continue to be critical for stakeholders in Texas real estate.