10 Texas Housing Markets Bracing for Major Price Declines in 2026

If you're a homeowner or looking to buy in Texas, you'll want to pay close attention to this. According to the latest forecast from Zillow, some Texas housing markets are staring down the barrel of significant home price drops in 2026. While the national picture suggests modest growth, a specific set of Texas metros are projected to see the sharpest declines over the 12 months from October 2025 to October 2026. This isn't just about a little dip; some areas are bracing for double-digit percentage drops.

10 Texas Housing Markets Bracing for Major Price Declines in 2026

I've seen cycles of boom and bust, but this forecast from Zillow definitely raises an eyebrow. It’s a stark reminder that real estate isn't monolithic – what happens in one city can be vastly different from another, even within the same state. Let's dive into which parts of the Lone Star State might see their home values take a hit and why.

Understanding the Forecast: What's Driving the Declines?

Before we get to the list, it's crucial to understand why Zillow is predicting these declines. Several factors are usually at play in a softening market. High mortgage rates, while showing signs of potentially easing, have already had a significant impact on affordability. When buying a home becomes more expensive due to rising interest rates, demand naturally cools. This can lead to properties sitting on the market longer, and sellers may eventually have to lower their asking prices to attract buyers.

Another piece of the puzzle is housing inventory. While the national picture suggests new listings are outpacing demand, leading to a leveling off of price appreciation nationwide, certain local markets might experience a different dynamic. If a region built up a lot of new housing during a boom period, and then demand suddenly slows, that extra supply can put downward pressure on prices. Conversely, some areas might be experiencing issues specific to their local economy, like job losses or a downturn in a key industry, which would directly impact housing demand.

Zillow's forecast specifically mentions that sustained elevated mortgage rates are keeping more would-be buyers renting, which affects both home sales and rental prices. For areas projected to decline, this suggests that the issues are localized rather than a broad national trend.

The Top 10 Texas Housing Markets Facing Steepest Price Corrections 

Zillow's data points to a cluster of smaller metropolitan areas, particularly in West Texas and South Texas, as being most vulnerable. These are often communities with economies that are more heavily reliant on specific industries, like oil and gas, which can be quite volatile.

Here are the Texas housing markets Zillow forecasts to see the most significant price declines between October 2025 and October 2026:

Region Name	Projected Price Change (Oct 2025 – Oct 2026)
Pecos, TX	-11.8%
Alice, TX	-9.9%
Zapata, TX	-9.6%
Big Spring, TX	-8.5%
Beeville, TX	-8.0%
Sweetwater, TX	-7.8%
Rio Grande City, TX	-7.5%
Raymondville, TX	-7.1%
Vernon, TX	-6.0%
Lamesa, TX	-5.8%

As you can see, Pecos, in West Texas, is projected to lead the pack with an 11.8% drop in home prices. This area has historically been tied to the oil and gas industry, and the cyclical nature of that sector can significantly impact local housing markets. When oil prices are high and exploration is active, demand surges. When they fall, the opposite happens.

Looking at this list, I notice a pattern. Many of these are smaller cities. Smaller markets can sometimes be more susceptible to rapid price swings because they have fewer diverse economic drivers. A downturn in a major local employer or industry can have a more pronounced effect compared to a large, diversified metropolitan area.

Deeper Dive into Affected Regions

Let's take a closer look at a couple of these areas to understand the potential nuances:

• Pecos, TX: Situated in the heart of the Permian Basin, Pecos's economy is heavily influenced by oil and gas activity. Increased exploration and production can lead to rapid population growth and housing demand, driving prices up quickly. However, when the industry experiences a downturn, the reverse can happen just as fast. Zillow's projection suggests that the current economic winds are not favorable for sustained price growth here, and a correction is anticipated.
• Alice, TX: Located in South Texas, Alice's economy has also seen influences from the energy sector, as well as agriculture. Shifts in commodity prices or changes in industrial output can directly affect job availability and, consequently, housing demand. A projected decline of nearly 10% indicates that market forces in Alice are expected to push prices down significantly.

These are not just abstract numbers; for the people living in these communities, these forecasts can represent real changes in their home equity and their ability to afford housing moving forward. It’s a tough outlook for sellers in these specific markets.

Contrast: Texas Markets Expected to See Modest Growth

It's not all doom and gloom across the entire state. To provide a more complete picture, Zillow also forecasts modest growth in other Texas housing markets. This contrast is important, as it highlights the localized nature of real estate trends.

Here are some Texas regions Zillow expects to see modest home price appreciation:

Region Name	Projected Price Change (Oct 2025 – Oct 2026)
El Paso, TX	2.4%
Stephenville, TX	2.2%
Corsicana, TX	1.9%
Brownsville, TX	1.8%
McAllen, TX	1.6%
Tyler, TX	1.3%
Wichita Falls, TX	1.2%
Amarillo, TX	1.2%

These markets, generally showing projected growth of around 1-2%, are likely benefiting from more diversified economies, sustained population growth, or perhaps more stable demand drivers. For instance, El Paso, a major border city, has a robust economy with diverse sectors. Tyler, in East Texas, has seen growth in healthcare and technology. These markets are better positioned to weather economic shifts than those heavily reliant on a single industry.

The National Picture: A Gentle Headwind

It’s helpful to zoom out and look at Zillow’s national forecast. Across the United States, home values are expected to rise by about 1.2% over the next 12 months. Home sales are projected to increase slightly. This points to a market that isn’t in freefall but rather experiencing a period of rebalancing.

Key national trends cited by Zillow include:

• Modest Home Value Growth: A projected 1.2% increase nationally, a far cry from the rapid appreciation seen in previous years.
• Inventory and Demand Balance: New listings are keeping pace with demand, which helps to ease price pressures.
• Affordability Challenges: Elevated mortgage rates continue to make buying a home difficult for many.
• Improving Sales Projections: Home sales are expected to improve in 2026 as mortgage rates potentially ease and pent-up demand returns.

The national forecast of muted growth is largely driven by affordability constraints due to higher interest rates. However, where Texas differs is in the stark decline projected for specific micro-markets. This isn't a uniform cooling; it's a localized recalibration based on regional economic health and supply-demand dynamics.

Navigating the Texas Housing Market in 2026

For buyers in the markets projected for declines, this could present an opportunity. If Zillow's forecast holds true, those looking to purchase in areas like Pecos or Alice might find more negotiation power and lower prices than they would have a year or two ago. However, it's critical to understand the underlying economic reasons for the decline. Is it a temporary dip in a cyclical industry, or a more fundamental shift?

For homeowners in these areas, it’s a signal to manage expectations. If you were planning to sell, you might need to adjust your asking price to align with market realities. It also highlights the importance of local market research when making real estate decisions.

My personal take? Real estate forecasts are educated guesses based on current data and trends. They are not guarantees. However, Zillow is a leading voice in this space, and their data is worth paying attention to. The deep disparities between the projected declines in some Texas markets and the modest growth in others underscore the importance of looking beyond just the state-level trends. Texas is a big, diverse state, and its housing markets reflect that diversity.

It’s wise for anyone involved in the Texas real estate market – whether as a buyer, seller, or investor – to stay informed, understand local economic drivers, and consult with knowledgeable real estate professionals. The next couple of years promise to be interesting, with some areas cooling off significantly while others continue to see steady, albeit modest, growth.