Texas Housing Market Forecast for the Next 2 Years

Will Texas home prices drop in the next 2 years? The Texas housing market is expected to experience a moderate slowdown over the next two years, with some regions experiencing price declines while others show growth. The overall forecast indicates a transition from the strong growth seen in recent years towards a more balanced market.

I've been closely following the Texas housing scene for quite some time, and I'll share my insights and analysis of the projected market conditions for the next two years, based on data from reliable sources.

Current Market Trends:

The Texas housing market currently presents a mixed picture. While the third quarter ended on a positive note with an increase in home sales, other indicators are showing a bit of a slow-down after the superheated market of the past few years.

• Home Sales are Ticking Up: Statewide home sales saw a solid increase of 4.8% month-over-month in September, after a brief dip in August. This suggests a potentially strong October, but the momentum has to be seen to be believed. Houston showed the strongest growth among the major metropolitan areas (which we call the Big Four – Houston, Dallas, Austin, and San Antonio), with an impressive 11.6% jump.
• New Listings Slowed Down: The rate of new homes coming onto the market slowed down after a strong start to the year. This is quite normal for the fall and winter months in Texas. While San Antonio and Austin saw a small increase in new listings, Houston and Dallas experienced a 4% decrease each. It shows that the market might be shifting away from the crazy seller's market.
• Inventory is Gradually Rising: The number of active listings ticked up, with a 2.3% increase statewide. This is good news for buyers as it means a bit more selection and possibly a bit of a relief from the intense competition that has been there.
• Pending Sales Still Strong: Pending sales increased by 6.9%, signaling continued buyer interest and suggesting sales may remain strong in the coming months. Houston saw a particularly strong surge in pending listings with a 15.8% increase.
• Interest Rates Showed Some Relief: Interest rates have been on a downward trend for a while now. In September, both Treasury and mortgage rates saw a decrease, which could be a boost for the housing market. As interest rates fall, buyers can afford more, and there is some expectation that they can stay at this level for a few months. I do not expect rates to fall sharply in the next year. The Federal Reserve has reduced rates over the last few months. This reduction in rates is likely to result in more people looking to refinance their mortgages and buy new homes.

Single-Family Housing Market Indicators

The new-home construction side of the market is showing some signs of cooling after a very hot period early this year.

• Building Permits Dipped: Statewide building permits fell slightly in September. Except for San Antonio, the Big Four saw decreases in permits.
• Construction Starts Slowed Down: After some strong monthly increases, single-family construction starts decreased. Dallas experienced the biggest drop, followed by Houston and Austin. San Antonio was an exception, with a small increase.
• Total Value of Home Starts Increased: Despite the drop in the number of starts, the total value of single-family housing starts increased. This is probably due to the increasing cost of construction, and not an increase in the volume of homes being built.

Home Prices: A Slight Uptick

Home prices edged up slightly in September.

• Texas Median Home Prices rose by 0.9% month-over-month. San Antonio and Houston saw a solid increase, while Austin and Dallas saw minor declines or no change.
• Texas Repeat Sales Home Price Index: This index, which is a better indicator of price changes, showed a 0.4% decrease month-over-month but an increase of 1.7% year-over-year. It tells us that, while prices are flat right now, over the past 12 months they have still been rising in Texas.

Texas Housing Market Forecast for the Next Two Years:

I believe that the Texas housing market will see a more balanced, and somewhat slower growth trajectory over the next couple of years. Here are my thoughts and predictions based on the current trends and data:

• A Gradual Shift Toward a More Balanced Market: After a very strong seller's market, we are moving towards a more balanced market with less competition. This means it will be a more stable time to buy and sell a home.
• Home Price Growth to Moderate: I expect home price growth to slow down considerably compared to recent years. Some areas will likely see small increases, while others may experience minor price declines. I don't think that Texas is on the verge of a crash.
• Interest Rates to Remain Relatively Low: I think that rates will remain low for the foreseeable future, but not fall dramatically. This can lead to more people refinancing their homes and buying new homes.
• Inventory Levels to Increase Gradually: Inventory levels are expected to continue rising, but not dramatically. As we get closer to the end of the year, we'll likely see more homes come onto the market as sellers get motivated to move in the spring or summer.
• Buyer Competition to Ease: With more options for buyers and some moderation in price increases, the intense competition we have seen in recent years will ease up. It will still be a competitive market, but it will be more manageable.
• New Construction to Slow Down Slightly: The new construction market is likely to cool down a bit. However, with the increasing population of Texas, it is likely that it will not decline too much.

Texas Home Price Market Forecast: MSA-Specific Projections

Now let's zoom in on some specific areas within Texas and look at what Zillow's forecast for home price changes looks like for the next few months:

Metropolitan Statistical Area (MSA)	Forecast for Nov. 30, 2024	Forecast for Jan. 31, 2025	Forecast for Oct. 31, 2025
Jacksonville, TX	0.3%	0.7%	4.6%
Stephenville, TX	0.3%	0.8%	4.6%
McAllen, TX	0.1%	0.5%	4.4%
Brownsville, TX	-0.2%	-0.2%	3.6%
Corsicana, TX	-0.1%	0.5%	3.6%
El Paso, TX	0%	0%	3.5%
Wichita Falls, TX	0.3%	0.7%	3.5%
Hereford, TX	0.4%	0.8%	3.5%
Palestine, TX	0%	0.5%	3.1%
Tyler, TX	0.1%	0.3%	3%
Waco, TX	-0.3%	-0.5%	2.4%
Mineral Wells, TX	-0.2%	-0.2%	2.2%
Sherman, TX	-0.3%	-0.4%	2.1%
Gainesville, TX	0.2%	0.3%	2.1%
Killeen, TX	-0.4%	-0.9%	1.7%
Amarillo, TX	-0.1%	-0.2%	1.6%
San Angelo, TX	0.3%	0.5%	1.3%
Del Rio, TX	0.1%	0.3%	1.3%
Dallas, TX	-0.2%	-0.7%	1.2%
Athens, TX	-0.4%	-0.9%	1.2%
Mount Pleasant, TX	-0.5%	-0.7%	1.2%
Kerrville, TX	-0.1%	-0.4%	1%
Paris, TX	-0.2%	-0.7%	1%
Nacogdoches, TX	0.1%	0.2%	0.9%
Brownwood, TX	-0.2%	-0.3%	0.9%
Fredericksburg, TX	0%	-0.9%	0.9%
Abilene, TX	-0.2%	-0.1%	0.8%
Eagle Pass, TX	0.1%	-0.2%	0.7%
Houston, TX	-0.2%	-0.6%	0.6%
College Station, TX	-0.1%	-0.4%	0.4%
San Antonio, TX	-0.3%	-0.7%	0.2%
Brenham, TX	-0.4%	-0.8%	0.2%
Lubbock, TX	-0.4%	-1%	0.1%
Longview, TX	-0.1%	-0.2%	0.1%
Lufkin, TX	-0.6%	-0.7%	0.1%
Victoria, TX	-0.1%	-0.4%	0%
Austin, TX	-0.4%	-1.8%	-0.4%
Huntsville, TX	-0.4%	-0.9%	-0.4%
Sulphur Springs, TX	-1%	-1.4%	-0.5%
Port Lavaca, TX	0.1%	-0.4%	-0.5%
Bay City, TX	0.1%	-0.3%	-0.8%
Texarkana, TX	-0.4%	-0.8%	-0.9%
Laredo, TX	0%	-0.5%	-1%
Corpus Christi, TX	-0.4%	-0.8%	-1.4%
Uvalde, TX	-0.3%	-0.6%	-1.4%
Dumas, TX	0%	0%	-1.4%
Midland, TX	0.1%	0%	-1.9%
Kingsville, TX	-0.4%	-0.8%	-1.9%
Andrews, TX	0.1%	-0.3%	-1.9%
El Campo, TX	-0.3%	-1.1%	-2%
Pampa, TX	-0.6%	-1.1%	-2%
Levelland, TX	-0.3%	-0.8%	-2.5%
Borger, TX	-0.3%	-0.6%	-2.5%
Odessa, TX	0.1%	-0.6%	-3%
Snyder, TX	-0.1%	-0.9%	-3%
Beaumont, TX	-0.1%	-0.7%	-3.1%
Plainview, TX	-1%	-2%	-3.3%
Rio Grande City, TX	-0.5%	-1.4%	-3.6%
Vernon, TX	-1.4%	-2.2%	-4.3%
Lamesa, TX	-0.2%	-0.7%	-4.5%
Beeville, TX	-0.7%	-1.7%	-5.6%
Raymondville, TX	-0.5%	-1.4%	-6.1%
Sweetwater, TX	-1%	-2.6%	-6.9%
Zapata, TX	-0.8%	-2.6%	-7.2%
Alice, TX	-0.8%	-2.4%	-7.5%
Big Spring, TX	-1.6%	-3.7%	-8.1%
Pecos, TX	-1.4%	-3.5%	-9.5%

Regions Poised for Growth:

Based on Zillow's forecast, areas like Jacksonville, Stephenville, McAllen, and several other smaller cities are projected to see continued, albeit moderate, home price growth over the next year. These smaller MSAs, or even cities within larger MSAs, may have more affordable housing options and greater potential for growth.

Regions Poised for Decline:

Several areas, including Austin, Huntsville, Sulphur Springs, Corpus Christi, and the Permian Basin cities like Odessa and Midland, face the possibility of experiencing a decline in home prices over the next year. Keep in mind that the projected declines are generally relatively small.

Possible Forecast for 2026

Extending the forecast beyond the next two years is trickier, as the housing market can be influenced by numerous factors, including economic conditions, employment trends, and changes in interest rates. However, based on my current understanding of the market, I believe that 2026 could potentially show:

• Continued Slow Growth or Slight Declines: I believe that the market will continue to be somewhat sluggish through most of 2026.
• Increased Affordability: With a more balanced market and the potential for prices to stabilize, there could be more opportunities for buyers to find a home at a price that feels more reasonable.
• Continued Moderation in New Construction: I see the new construction market continuing to moderate due to the slowing demand for homes in certain areas.
• Potential for Increased Interest Rates: I believe there is a possibility of rates rising slightly in 2026, but I don't expect a dramatic rise.

So, Will Home Prices Crash in Texas?

Based on my experience and the data, I do not believe that a housing market crash is on the horizon for Texas. While we are moving into a more balanced market, and some areas are expected to see minor price declines, the overall fundamentals of the Texas economy remain strong. The population growth, job market, and demand for housing all support a stable market, rather than a dramatic drop.