Texas is the second most populous state in the U.S., second only to California. The Texas real estate market has been under pressure in recent years. Over 30.5 million people reside in the state. Driven by outsized growth in Dallas, Houston and Austin, the state’s economy has expanded rapidly and is now valued at over $2.6 trillion. The Texas economy expanded by 7.4% in 2023, handily outpacing the 2.9% growth rate seen by the rest of the country.
The Texas growth story is driven by its business-friendly environment. It has attracted startups and Fortune 500 companies. The market has also found favor with real estate investors and homebuilders.
Various factors drive Texas real estate prices, including current mortgage rates and the supply of available homes. Because this is such a dynamic market, examining potential shifts in the state's real estate landscape makes sense. This real estate market analysis looks at the factors driving demand for investors and those moving to the state.
Current Overview Of Texas Real Estate
Part of the story of the Texas real estate market is migration from other states. In 2022, approximately 102,000 Californians moved to Texas. The real estate may have felt like a bargain for these new Texas residents, but that was less the case for existing Texans who suddenly found homes less affordable.
In Texas real estate, there are four main markets to consider: Austin, Dallas, Houston and San Antonio. These markets and surrounding areas are driving most of the growth in the state. Of the big four, Dallas and Houston are the larger markets.
City Q2 Median Price Inventory Sales
Austin-Round Rock-San Marcos $455,000 29.5% -2.7%
Dallas-Fort Worth-Arlington $406,000 44.7% -1.7%
San Antonio-New Braunfels $311,000 43.4% -5.6%
Houston-Pasadena-The Woodlands $343,863 42.5% -3%
The second-quarter 2024 report from Texas Realtors put the statewide median home price at $345,000, up by 0.6% year over year. Active listings were up by over 40% and inventory rose to 4.6 months. This indicates a potential softening in the market.
Factors Influencing Real Estate Prices In Texas
Economic Growth
Texas has grown by leaps and bounds. From August 2023 to August 2024, the state added 302,400 jobs, leading the country in job creation. Texas has more Fortune 500 companies than any other state, leading Gov. Greg Abbott to call it the “headquarters of headquarters.”
Urban Sprawl
Although the population is growing, there is plenty of room for expansion. Texas is one of the largest states in the country and areas around its main cities are being rapidly developed. Many Texans will continue migrating to suburban and exurban areas due to affordability and the desire for more space. Secondary markets like Round Rock, Frisco and Katy are set to gain more attention, benefiting from improved infrastructure, amenities and relatively lower costs.
Foreign Investment
Relatively low prices and a fast-growing economy have caught the attention of international investors. The National Association of Realtors 2024 survey of international buyers found that Texas was the second most popular state for buyers from other countries, particularly those from Mexico. According to the survey, 42% of buyers from Mexico purchased in Texas.
What Makes Texas Real Estate Prices Go Up?
While real estate prices in Texas are not rising universally across the state, they have increased dramatically in many areas around Dallas, Houston and Austin. The main factor driving prices up in these regions is high demand.
What Makes Texas Real Estate Prices Go Down?
Texas real estate does have some vulnerabilities. As we’ve seen in the Austin market, oversupply can decrease prices. Texas leads the U.S. in new home construction, with all four of Texas’s main cities in the top five for new construction. One of the large homebuilders, KB Home, announced it was dropping prices in Austin and San Antonio. If certain areas become overbuilt, that may be a concern.
Concerns over climate are also a factor in Texas. Over the past several years, the state has seen several major hurricanes and storms that have caused widespread flooding and devastation. One primary concern in Texas is the strength of the power grid. An analysis from Climate Central showed that Texas had more power outages from 2000 to 2023 than any other state.
Like Florida, Texas is facing rising home insurance costs. Multiple insurance providers, including Progressive, are not issuing new policies in the state. This may be temporary, but if more insurers leave the state, that will create concerns about the value of homes long-term.
Texas Real Estate Forecast For 2024
The Texas real estate market has been very up and down in 2024. The Texas Real Estate Center reported that sales were up 15.4% in July after a slow June. Like most of the country, Texas has felt the impact of higher mortgage rates, which has dragged sales down.
Given the current pace of sales, home prices are likely to continue dropping by 1% to 3% for the rest of the year. This forecast takes into account current mortgage rates and does not anticipate a dramatic drop in mortgage rates. If the Fed cuts interest rates and mortgage rates fall by even half a percentage point, that could change the forecast.
Texas Real Estate Forecast For 2025
As we look toward the Texas real estate market for 2025, we must consider interest rates and the economy. If mortgage rates keep falling, buyers may flood into the market, which could be good for the current high inventory in Texas.
The booming Texas economy has seen some signs of a slowdown. Some tech companies in Austin have reduced the amount of office space they hold, which could be a sign that the tech layoffs that dominated much of 2023 and 2024 may continue into 2025. If that happens, it would have an outsized impact on major Texas cities. Houston is heavily tied to the energy business and any changes there might also be worth watching.
Nationally, real estate sales are expected to be much better than in 2024. The National Association of Realtors estimates that existing home sales will rise 16% in 2025 from their estimated 2024 totals. However, it is also forecasting that prices will rise less than 2%.
Zillow is even less optimistic, predicting that nationwide prices will increase by less than 1%. The Q3 2024 Fannie Mae Home Prices Expectations Survey found that experts are forecasting price growth of 3.1% for 2025. Texas is likely to come in under those numbers. The CoreLogic HPI Forecast calls for an increase of 2.3% from August 2024 to August 2025.
Texas Real Estate Forecast For 2030
No one has a crystal ball for forecasting Texas real estate for the next five years. However, the state is expected to continue to see substantial growth. A forecast from Aterio puts Texas’s estimated 2030 population at 32.2 million, up 6.4% from 2025. That level of expansion could cause home prices to rise if the state can’t keep up with demand. A report from the Texas Comptroller said that the state could need over 306,000 homes.
According to data from the U.S. Federal Housing Agency, prices were up by over 108% from Q2 2014 to Q2 2024. However, from Q2 2004 to Q2 2014, prices were up only by around 31%. Of course, that swath of time included the Great Financial Crisis, but it shows that the recent price increase in many parts of Texas may not be the story for the future.
Challenges And Opportunities In Texas Real Estate
Texas’s real estate market still has plenty of opportunities for first-time homebuyers as long as you are willing to commute. Suburbs and exurbs will provide the best chance for an affordable home. While affordability has been dropping, the state’s median home price is still below the national average. Affordability has become a major concern for residents, with 90% saying it is an issue and over half saying they are facing strain from housing costs.
Is Texas Real Estate A Good Investment?
Many buyers who purchased in Texas over the last few years have enjoyed a substantial increase in the value of their homes and a nice bump in home equity. The health of Texas real estate will depend a lot on the state’s ability to attract high-paying jobs.
The answer to this question may also depend on how long you are willing to hold on to a property. If looking at Texas real estate as a rental property, you will want to monitor rental rates. After a sharp run-up in rental prices, the average rental price has stabilized. Zillow calculates the current median rent at $1,900.
Frequently Asked Questions
Is now a good time to buy a house in Texas?
Depending on the area, there is still a high demand for Texas homes. Many areas, such as Dallas and Houston, are leading the country in growth. Homebuilders are actively building in these areas to keep up with demand. If mortgage rates continue to fall, that could increase competition for homes.
Is now a good time to sell a house in Texas?
Texas real estate prices have hit record highs in the past several years. Inventory is rising in some areas, including Austin, but overall, investors and homeowners should be able to capitalize on the rapid price appreciation that many areas of Texas have enjoyed.
What is the current price for a house in Texas?
Zillow data shows the median price for a home in Texas is $301,627 as of August 2024. Home values have risen by 5.1% year over year.