If you're like me, you've probably been keeping a close eye on the housing market, especially here in Texas. It feels like just yesterday homes were flying off the shelves, with bidding wars becoming the norm. But lately, I've been hearing whispers – are things starting to slow down? Specifically, are Texas home sales dropping in 2025?

Well, based on the latest data, the answer is a definitive yes, at least through the first quarter of the year. Total home sales have indeed declined, and while a recent increase in the number of homes listed for sale might seem like good news, it hasn't been enough to stop this slowdown, particularly in February and March.

Are Texas Home Sales Dropping in 2025?

Why the Chill in the Texas Housing Market?

So, what's behind this shift? From where I stand, it seems to be a combination of factors that are putting the brakes on what was a red-hot market. The most significant, in my opinion, is the stubborn persistence of high mortgage rates. Hovering around the 6.75% to 7% mark, these rates are making it tough for many would-be buyers to afford a home. It’s simple math – higher interest means higher monthly payments, and that can price a lot of people out of the market, especially first-time buyers and those with moderate incomes who rely heavily on financing.

The data backs this up. We’re seeing a surge in new listings, meaning more homes are becoming available. In fact, the rate at which new listings are hitting the market is outpacing even the build-up we saw during the Great Financial Crisis. This rapid growth in inventory, coupled with the slowdown in sales, is a clear indicator that buyer demand is cooling.

The Entry-Level Impact

What’s particularly interesting is that the surge in inventory is being led by entry-level homes. This tells me that those high mortgage rates are disproportionately affecting first-time and moderate-income homebuyers. These are the folks who often have less savings for a down payment and are more sensitive to fluctuations in interest rates. It’s a tough spot to be in – wanting to achieve the dream of homeownership but facing significant affordability hurdles.

Sellers Reacting to the Shift

Now, with more homes on the market and fewer buyers jumping to make offers, sellers are starting to feel the pressure. We’re seeing a record number of price cuts as sellers try to entice buyers. In the first quarter of 2025, the pace of these price reductions accelerated compared to the previous two years, reaching levels we haven’t seen since 2011 – a time when the market was still recovering from widespread foreclosures. This tells me that sellers are recognizing the changing dynamics and are willing to lower their expectations to close a deal.

The Federal Reserve's Role

The Federal Reserve's decision to keep interest rates steady in their recent meetings is another piece of the puzzle. While this eliminates some uncertainty, it also means that mortgage rates are likely to remain elevated for the foreseeable future. This lack of immediate relief from high borrowing costs will likely continue to dampen buyer demand and keep affordability a major challenge.

Looking at the Numbers

Let's drill down into some of the specific figures for March 2025 (Source: Texas Real Estate Research Center):

• Total Home Sales: Down 1.8% year-over-year.
• Median Home Price: Up 1.0% year-over-year to $340,000. While still an increase, the pace of appreciation has clearly slowed.
• Active Listings: Soared by 29.7% year-over-year, indicating a significant increase in available homes.
• New Construction: Decreased by 6.8% year-over-year. This could suggest builders are reacting to the cooling demand.

When we compare Texas to the national picture, in March 2025:

Metric	Texas	U.S.
Monthly Closed Sales	28,190	315,000
YoY Sales Change	-1.8%	-3.1%
YTD Sales Change	-1.7%	-2.2%
Median Sale Price	$340,000	$403,700

As you can see, while Texas is experiencing a dip in sales, the national trend is similar, though slightly more pronounced.

Inventory Growth: A Deeper Dive

The growth in active listings is truly remarkable. At the end of March 2025, there were 132,140 active listings statewide, a nearly 30% jump from the previous year. And as I mentioned, entry-level homes are leading this surge.

Price Range	Year-over-Year Inventory Growth (March 2025)
Below $300,000	33%
$300,000 – $500,000	30%
$500,000 – $750,000	27%
Above $750,000	25%

This clearly shows that the impact of affordability is most acutely felt at the lower end of the market.

Price Reductions: More Common Than Ever

The fact that nearly 65% of home sales in March saw price reductions of at least $5,000 is a significant data point. This is higher than what we saw in both 2024 and 2023, and even surpasses the levels during the early recovery period after the last housing downturn. The median price reduction in March was $12,500, representing about 3.6% of the original listing price. This gives buyers more negotiating power than they've had in quite some time.

Regional Differences within Texas

It’s important to remember that the Texas housing market isn’t one monolithic entity. Different metropolitan areas are experiencing different trends. For instance, Houston continues to see steady, albeit gradual, home price appreciation. On the other hand, Dallas has seen some weakening in home prices, likely due to the significant increase in inventory there. Austin is even experiencing a slight year-over-year price decline. Areas like Laredo and College Station are bucking the statewide trend and showing strong year-over-year sales growth, while others like Victoria and Eagle Pass are seeing more significant declines.

New Construction Trends

The decrease in new construction permits statewide suggests that builders are taking note of the cooling demand. However, there are regional variations here as well. While major markets like Houston, Dallas, and Austin have seen declines in permit activity, some smaller areas like Abilene, San Angelo, and Waco are experiencing significant increases. This could indicate a shift in where new development is taking place.

My Takeaway

Based on the data and my understanding of the market, it's clear that Texas home sales are indeed dropping in 2025. The primary drivers appear to be high mortgage rates impacting affordability and leading to a cooling of buyer demand. The surge in inventory is giving buyers more choices and more negotiating power, resulting in a higher number of price reductions. While median home prices are still up slightly year-over-year statewide, the rate of appreciation has slowed considerably, and some major metropolitan areas are even seeing price declines.

While it's not the dramatic downturn some might fear, it's definitely a significant shift from the hyper-competitive market we've seen in recent years. For buyers, this could present opportunities to find more options and potentially negotiate better deals. For sellers, it means adjusting expectations and being more strategic with pricing.

It remains to be seen how the rest of 2025 will unfold. The Federal Reserve's future decisions on interest rates will undoubtedly play a crucial role. However, as it stands, the Texas housing market in 2025 is characterized by slowing sales, rising inventory, and increased price sensitivity. It's a market that demands careful navigation for both buyers and sellers.