Texas is a beautiful place to live. As one of the largest states in the country, Texas is home to a diverse range of natural beauty and population. Within the state, one will find mountains, rivers, deserts, forests, lakes, farmland, bustling metropolises, and suburbs. While it’s easy to stereotype Texas, it’s harder to understand accurately. There are cowhands and horses, but there are also some of the largest cities in the country. Texas’s housing market reflects this, as it can be widely varied.
Real estate is huge in Texas, and Texas is huge in real estate. This varied and diverse housing market accounts for a wide swatch of commercial and residential real estate transactions, and real estate makes up a major component of Texas’s thriving economy.
To better understand, we’ll explore Texas’s housing market, taking into account historical context, the current state of the market, contemporary market conditions, regions within Texas, demographic factors, challenges, opportunities, and future outlook. Let’s dive in.
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Historical Context
To better understand where we are, it’s often wise to begin the conversation by exploring where we came from and how we got here. Let’s dive into some historical context that may make it easier to understand the current state of the Texas real estate market, as well as what future trends we may see unravel moving forward.
One of the important things to understand about Texas’s economy is that it is often linked in various ways to the energy market. Texas is a major supplier of energy — especially crude oil and petroleum products. The oil industry in Texas is so large and influential that many historical housing trends in Texas’s past may be easily correlated to shifts in the oil market. That said, Texas real estate is a force of its own and can be highly influential to the state in general.
According to recent data from the Texas A&M University Texas Real Estate Research Center, Texas had a 14.6 percent increase in total home sales month over month (MOM), resulting in 29,209 homes sold. Notably, all major cities in Texas experienced an upswing in housing sales compared to fourth quarter 2023.
Some notable events have had a major impact on the national real estate market and Texas’s real estate market in recent years. Most recently, the COVID-19 pandemic severely impacted real estate markets nationally, and Texas was no exception.
In 2020, more than half of realtors surveyed by the University of Houston’s Hobby School of Public Affairs reported losing sales during the pandemic. Still, many of them were confident that the market would rebound. One cause for concern in 2020 was the perception that inventory could be inadequate to meet demand.
Four years later, the market has seen some rebound. In recent months, (at the time of writing) construction permits in Texas show that home construction may be rising to meet demand. In October’s Texas Housing Insight Report from the University of A&M, August of 2023 showed both lowered median home prices and a growth in home sales. Moreover, August was the second month in which more than 13,000 single-family homes were approved for construction. Across major Texas cities, Houston led the growth, with Dallas and Austin following closely behind. Only in San Antonio did the construction of single-family home approval drop off in August among major Texas cities.
Overview of current market conditions
Currently, Texas shows strong signs of growth in the real estate market. The state seems to be rebounding from the effects of the COVID-19 pandemic, with some important market metrics showing promising signals. While some rebound is to be expected as the economy recovers from the pandemic, some signs may still be particularly heartening, especially in light of global events that have made economic growth tenuous.
Home Prices in Texas 2022 and 2023
In 2023 and 2022, home prices in Texas have been relatively stable. According to data from Redfin, median home prices in Texas only rose 0.1% year-over-year as of September 2023. What’s more, median home prices in Texas are pretty competitive. Redfin’s data shows the median price for all single-family homes is $352,700 as of September 2023. According to data from The Federal Reserve Bank of St. Louis, in Q2 2023, the national median home price was noticeably higher, at $416,100. While this data doesn’t correspond to the same moment in time and only extends to April of 2023, the difference is noteworthy.
Inventory Levels
According to the Texas Quarterly Housing Report 2023 Q2 Edition from Texas Realtors, Inventory rose in Q2 2023, showing a significant increase from just 2 to 3.2 months from the same period in 2022.
During the COVID pandemic, one of the primary causes for concern among realtors surveyed in Texas by the University of Houston’s Hobby School of Public Affairs was inventory levels. As such, it’s important to note that inventory may improve soon. Data from the Texas Housing Insight Report, from the University of A&M, in August of 2023 showed growth in construction starts and permits. This could be a signal that inventory will be on the rise in the coming times.
Supply and Demand Dynamics
As with new construction, demand also appears to rise across many Texas real estate markets. While across Texas, home sales dipped between 2022 and 2023, they’re still higher than they were in 2019 now in 2023. What’s more, according to data from October’s Texas Housing Insight Report from the University of A&M, home sales dropped to a low of 18,032 in January of 2023 but have risen since then, having peaked in May 2023 at 34,406. In Aug 2023, 31,509 homes were sold — only a modest decline from May’s numbers.
With construction showing signs of future growth, as we’ve discussed, the dynamics of supply and demand could be interesting to watch in the coming months or years. Should buying consistently rise in the near future, this could drive the need for even more construction.
Regional analysis
One of the interesting things about Texas is how varied the communities throughout it can be. While Texas is home to some of the largest cities in the country — including Houston, which ranks 4th highest in population in the nation, placing it among other major U.S. cities, such as Chicago, New York, and Los Angeles — Texas is also home to some incredibly small and sparsely populated towns, as well as everything in between.
As such, to get a better understanding of the state of real estate in Texas, it’s important to take a look at some regional data that shows where stark differences may lie, especially between the four major cities in Texas and between major cities and rural communities that make up much of the state.
Rural Vs. Urban Areas in Texas
The disparity between housing markets in Texas can be pretty steep. As a very large and highly populous state that includes both the highest amount of rural population in the country and the second highest amount of urban population in the country (second only to California) as of 2020, it’s important to understand how these markets can differ when understanding the state of Texas’s real estate market overall.
To take the example of Amarillo, TX, which is often called the cheapest place to live in Texas, has a population of only around 200,000 (compare this to Houston with a population of well over 6 million ) and sees median home prices of $198,392, up 4.0% over the past year and goes to pending in around 29 days.
To take the example of Amarillo, TX, which is often called the cheapest place to live in Texas, has a population of only around 200,000 (compare this to Houston with a population of well over 6 million ) and sees median home prices of $$269,461 as of March 2024, according to data from Zillow.
In recent years, rural areas have seen rising home prices as Texans and others have migrated from big cities into less populated counties and towns. This reflects a nationwide trend, and we can observe it in Texas.
Fredericksburg, TX, for example, saw a median home sale price of $607,000 in the first quarter of 2024 according to data from Rocket Homes. This is more than 180% of the median home price for Houston during the same time. The population divide is more than stark; Houston’s is well over 2 million, and some estimates place it even higher. Meanwhile, according to the United States Census Bureau, Fredericksburg, Texas’s population was only 11,072 as of 2021. In other words, Houston is around 180 times as large as Fredricksburg’s population.
Major Cities in Texas
It’s also important to explore how the housing market differs between major cities in Texas. The big four cities in Texas are generally considered to be Houston, Dallas, San Antonio, and Austin. According to data from Redfin, these cities make up a sizable portion of the state’s population despite being only a handful of municipalities. When combined, Dallas-Fort Worth-Arlington and Houston-The Woodlands-Sugar Land make up roughly half of the state’s total population as of 2022.
Comparing major cities, we can see some divides in terms of homes sold as well as home prices for August 2023, according to data from Febraury 2024 Texas Housing Insight Report from the University of A&M. While home sales grew in August across all three cities, housing sales in Austin – Roundrock was just over 2,853 for the month, while in Dallas-Fort Worth-Arlington, they were nearly 8,679 during the same period. In Houston-The Woodlands-Sugar Land, they were well above 7,951. Meanwhile, in San Antonio and New Braunfels, home sales were around the 3,228 mark.
Median home prices also differ, according to the same data. The average Austin home value is $546,619, down 5.1% over the past year and goes to pending in around 46 days. Dallas-Fort Worth-Arlington’s median home price was $378,265 in March 2024. Houston-The Woodlands-Sugar Land and San Antonio-New Braunfels saw cooler prices during this period, at $314,779 and $378,265 respectively.
Demographic factors
To understand the real estate market in Texas, looking at demographic data and better understanding the various factors that influence the movement of people and real estate transactions can be helpful.
First, it’s important to note that in recent years, Texas has experienced a dramatic shift in population. Already a highly populated state, Texas seems to continue growing. In fact, according to data from the United States Census Bureau, Texas recently became one of only two states with more than 30 million people. (The other one is California.) That’s a lot of people!
There are many things attracting people to Texas, and one of them, historically, has been low home prices. However, Texas is experiencing a hot real estate market, and some pundits see this as a shift in the other direction.
As Texas is a desirable place to live, with a yearly influx of hundreds of thousands of new Texans, we may see the demand for housing rise along with this trend. As the trend continues, some experts may consider policy and regulations as key issues influencing pricing. Texas has a growing urban population, which faces distinct challenges compared to rural areas. This brings us to our next section.
Government Policies and Regulations
To best understand the state of the real estate market in Texas, it’s often important to consider a range of factors that influence housing prices, new construction, and even demand for housing. Some such factors include government regulations and policies.
State and Local Policies and Regulations
Texas is a large state with a wide range of local policies and regulations in addition to statewide rules. All of these work with federal oversight to create the landscape in which Texas real estate operates.
One example of this in action is the Texas state legislature. In response to rapidly rising home prices, bills have been introduced both in the Texas House and Texas Senate that aim at easing burdens that act as a roadblock to new construction. Some challenges faced in new construction can be related to local ordinances and regulations. If builders can lessen the demand for new construction, prices could ease as a result.
Federal Housing Regulations
In addition to local and state policy, federal regulation has impacted Texas’s real estate market — and notably has had some positive impacts. For example, the Fair Housing Act makes it illegal to discriminate against homebuyers or renters on the basis of race, color, national origin, religion, sex, familial status, or disability. In recent years, Texas has seen an increase in diversity and is now the second most diverse state in the country as of 2024. This may have been influenced by federal regulations such as the Fair Housing Act.
Shifting Policies
Texas is grappling with astronomically high housing prices, as is much of the country. As policies change, we may also see dramatic changes across the Texas real estate market. It may be necessary for realtors and homebuyers to remain mindful of imminent policy changes moving forward.
Challenges and Opportunities
As Texas grapples with rising home prices and meeting demand for new construction, many challenges and opportunities are likely to abound for real estate investors and homebuyers. One notable challenge is housing affordability, especially as Texas becomes more populated in urban areas that have seen growth in recent years.
Housing Affordability
One challenge that homebuyers and realtors alike may face is the cost of housing. Nationally, home prices have been rising in recent years, and Texas’s real estate market reflects this in many ways. In fact, according to Zillow, the median home price in Q1 2024 was $304,027 and reflected an increase of 0.6% over the past year.
In Texas, rising housing prices have outpaced increases nationally between 2011 and 2016, per the Federal Reserve Bank of Dallas. As such, it’s fair to say that affordable housing may be an issue facing many Texans.
Real Estate Investment Opportunities
While housing prices may be a challenge, they won’t be sufficient to deter real estate investors in the Lone Star State entirely. Historically, real estate has often been considered a solid investment, and opportunities can be abundant when looking for them. Many still see Texas real estate as an excellent investment opportunity. This is partly because Texas is experiencing relatively rapid population growth and may continue to in coming years. Urban and rural areas are growing in many cases across the state. As such, it’s expected that demand may continue to remain strong across the state.
Infrastructure and Urban Development Initiatives
As we’ve explored, lawmakers and public policymakers have been exploring ways to improve the Texas housing market, and some approaches have focused on affordability. As urban centers across the state grow, so does the importance of affordable urban housing. As such, many local policymakers and officials have been eyeing ways to decrease costs. Many approaches focus on lowering the burden of construction, driving down demand, in theory, which could ease pricing.
Future Outlook
While the future is impossible to predict, we can look at current trends and extrapolate from them to better understand where the housing market in Texas might head in future months and years.
Predicted Trends
One trend that we may see unfold is a lowered demand for inventory in the housing market. According to February’s Texas Housing Insight Report from the University of A&M, the rise in new construction starts and permits may indicate growing momentum in single-family home inventory. In turn, this trend could theoretically allow housing prices to cool down and ease the pressure on realtors to find homes for their clients. As population growth continues across the state, affordable housing may be a looming challenge for homebuyers and realtors.
Predicted Challenges
As we’ve discussed, housing affordability may be one of the biggest challenges facing not only Texans but Americans overall in the real estate market. This coincides with challenges in meeting demand and may constitute a significant hurdle to overcome.
Opportunities for Homebuyers, Investors, and Developers
Even as Texas faces high housing prices, the state still represents a significant opportunity to many investors, homebuyers, and developers. As local and state lawmakers and policymakers work to ease burdens facing builders and developers, developers may find new opportunities to drive further construction growth. Meanwhile, as new Texans continue to migrate in, the state may see numerous opportunities for real estate investments.
Conclusion
The current state of the Texas real estate market is highly varied — as can be expected from such a large and diverse state. While the markets can be wildly different between different towns and cities across Texas, many regional areas face similar challenges in the housing market — ones that often coincide with or reflect larger trends nationally. Among these, access to affordable housing and concerns about inventory stand out as crucial challenges that policymakers are working to address.
As Texas continues to grow, housing prices may rise further, or they will eventually plateau and begin to ease off. Policymakers at the state and local levels are working to solve some of the most pressing challenges Texas faces in housing, such as widespread access to affordable housing. Nonetheless, Texas stands as an opportunity for many investors who are determined to find ways to leverage Texas’s incredible population growth and ever-changing real estate market.
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