Texas Housing Market: Trends and Forecast 2025-2026

Have you felt dizzy watching the Texas real estate market lately? For years, it seemed like prices were going nowhere but up, fueled by massive job growth and people moving here from all over the country. If you’re like me, you’ve been wondering: is the frenzy finally done? And, more importantly, what does the future hold for potential buyers and sellers?

I’ve spent some time reviewing the data and speaking with local experts. Here’s the straight answer: The current Texas housing market trends in 2025 show we are officially in a period of intense correction and transition. While home prices are dipping, home sales are proving resilient.

If you are looking for the overall picture for 2025, brace yourself: we are firmly operating in a buyer's housing market driven by elevated supply, meaning competition is low, but affordability is still tightly tied to fluctuations in mortgage rates. We anticipate this buyer-friendly period will continue through the end of 2025, with prices stabilizing but not significantly rebounding until mid-2026.

Now, let's roll up our sleeves and look at the hard facts defining the current state of Texas real estate.

Current Texas Housing Market Trends

The standard rule in real estate is that prices and sales go up and down together. When demand is high, prices soar, and lots of houses sell. When demand falls, sales slow down, and prices drop. But right now in Texas, we are seeing a fascinating “divergence”—a fancy word for things moving in opposite directions.

The Great Divergence: Sales are Up, Prices are Down

Recent market indicators from the Texas Real Estate Research Center show that while average home prices have continued to decline, sales activity is actually holding strong. For September 2025, the data paints an unexpected picture:

• September Home Sales surged ***7.3% Year-over-Year (YoY)***.
• The Home Price Index dropped 0.8% YoY.
• Active Inventory shot up a staggering 20.2% YoY.

Think about that for a second. We sold way more houses than we did last year, yet prices decreased. Why? Because we have way too many houses sitting on the market. That persistent supply glut is making sellers nervous, and buyers are taking advantage of the leverage they now hold.

This resilience in home sales is being fueled partly by falling mortgage rates (which make monthly payments more manageable) and partly by sellers finally accepting the new reality and lowering their prices. In fact, pending home sales—a strong indicator of future activity—were up 2.8% YoY, suggesting this sales momentum will continue through October and into the fall.

High Inventory is Driving the Transition (The Buyer’s Edge)

The biggest factor tilting the market toward buyers is the sheer volume of available housing. You can’t negotiate hard if the house across the street just sold for $50,000 over asking, but you can if that house has been sitting empty for 90 days.

We measure supply in “Months’ Supply.” A balanced market—one that doesn't favor the buyer or the seller—is typically considered 3 to 4 months of supply in Texas. Guess where we are now?

• As of September 2025, the housing inventory is at a 5.5-month supply. That’s a significant jump from 4.7 months just a year prior.

This excessive supply pressure is forcing sellers to make serious concessions. Look at the numbers on how much sellers are cutting prices:

Trend	Sep-2025	Sep-2024	Sep-2019 (Pre-Pandemic Norm)
Median Seller Price Cuts	$17,000	$14,500	$7,500
Average Days on Market (Sold Homes)	67 days	60 days	56 days
Average Days on Market (Unsold Listings)	96 days	87 days	90 days

That median price cut of $17,000 means buyers are negotiating harder, and sellers are accepting it. In percentage terms, sellers are taking roughly 5 percent off the asking price just to close a deal. That’s a massive win for buyers who are ready to move. Also, note that unsold homes are sitting on the market for an average of 96 days—that’s over three months! The quick sales of the pandemic era are truly a distant memory.

Where is the Demand? The Mortgage Rate Lock-In Problem

While overall sales look strong, a closer inspection reveals a major weakness: the middle of the market. This is where the famous “lock-in” effect is wreaking havoc.

Here is the inconvenient truth: Over 80 percent of existing mortgaged homeowners are locked into shockingly low mortgage rates (below 6 percent). If they sell their current home to upgrade—the “move-up” segment—they would have to trade their 4% mortgage for a 6% or 7% mortgage on a new, more expensive house. Financially, it often doesn't make sense.

This reluctance is creating skewed demand:

Price Segment	YoY Sales Change (September 2025)	Market Behavior
$250,000 and Below (Starter Homes)	+13.9%	Strongest performance. Buyers can make these payments work.
$350,000 to $600,000 (The Middle Tier/Move-Up)	-8.1% (Decline)	Weakest segment. Hit hardest by the affordability crisis and rate lock-in issue.
$800,000 and Above (Luxury)	+13.7%	Strong performance. These buyers are cash-rich and less sensitive to interest rates.

My take? Until those pesky mortgage rates drop significantly, the middle-tier market, which historically represents the largest share of buyer activity, will remain constrained. Everyone is either looking for the cheapest affordables or they are wealthy enough that rates don’t matter.

Texas Home Prices Fell Again in September

As expected, high supply leads to falling prices. September recorded the third straight month of negative year-over-year price change across the state. The statewide median price was $330,000.

This correction is not hitting every city equally. Some major metropolitan areas that saw huge growth during the pandemic are now correcting the fastest:

Metro Area	September 2025 Median Price	YoY Price/Market Behavior
Austin-Round Rock-San Marcos	$415,000	Continues to lead the state in price declines, though the pace has eased slightly.
Dallas-Fort Worth-Arlington	$386,700	Overall recorded a 1% annual decline, led by the Dallas-Plano-Irving division.
San Antonio-New Braunfels	$310,000	Experienced the most pressure recently, with a 1.9% YoY drop in September.
Houston-Pasadena-The Woodlands	$325,000	Price declines here are accelerating due to elevated inventory.

The fact that cities like Austin and San Antonio are seeing steeper drops makes sense; they experienced the most rapid price escalation previously. This is the market hitting the reset button.

Texas Housing Market Forecast 2025 and 2026

So, we know the current reality: Inventory is high, sellers are negotiating hard, and sales volume is surprisingly strong. But what happens over the next 12 to 24 months? Will prices keep tumbling?

Will Texas Home Prices Crash? (My Professional Opinion)

This is the question everyone asks me. Based on the data, the simple and firm answer is: No, Texas home prices are highly unlikely to crash.

The reason we won't see a 2008-style collapse is that this is not a crisis of bad borrowing or faulty loans; it is a crisis of affordability caused by high mortgage rates and elevated inventory levels, especially new construction.

When I look at Texas specifically, I see underlying factors that prevent a prolonged downturn:

1. Massive Population Growth: Texas still added more people than any other state last year. Demand for housing isn't gone; it’s just delayed until rates drop.
2. Job Market Strength: Our major metro areas (DFW, Houston, Austin) boast diversified job markets that continue to attract companies and workers.
3. Inventory Normalization: Although inventory is high right now (5.5 months), once rates drop and demand picks up, that inventory will be absorbed quickly, especially since new listings have slowed down (new listings fell 23.4% from their May peak).

My prediction: Instead of a crash, we will see continued price deterioration (small monthly drops) through the remainder of 2025, possibly resulting in an overall average decline of 2% to 4% for the full year 2025. After that, stabilization begins.

Comparing Texas to the National Picture

It’s helpful to see how our situation stacks up against the rest of the country. Lawrence Yun, Chief Economist for the National Association of Realtors (NAR), recently provided an optimistic outlook for the US market nationwide:

US Market Metric (NAR Forecast)	Projected 2025 Growth	Projected 2026 Growth
Existing Home Sales Growth	+6%	+11%
Median Home Price Appreciation	+3%	+4%
Average Mortgage Rate (2nd Half)	6.4%	6.1%

The national forecast expects prices to start appreciating again in 2025. However, Texas has to work off its current 5.5 months of supply first. Because our housing inventory is so much higher than the national average, Texas is likely to trail the nation on price appreciation but lead the nation in sales volume recovery. High inventory means sellers have to wait longer for prices to rise again.

2026 and 2027 Projections: The Path to Balance

Based on our current trajectory—high sales volume absorbing excess supply, coupled with the national expectation of lower rates—here is how I see the Texas market evolving:

Remaining 2025 Forecast (Q4 2025)

The pressure cooker stays on. This is still a strong Buyer's Housing Market.

• Prices: Prices will continue to cool, experiencing slow but steady month-over-month declines, especially in areas with very high inventory like Austin and San Antonio. The median seller concession ($17,000+) will remain high.
• Sales: Sales volume will surprise favorably, bolstered by buyers drawn in by lower prices and slightly better-off mortgage rates.
• Inventory: Inventory levels will likely begin to plateau and slowly shrink, setting the stage for 2026.

2026 Forecast (Year-End Projection)

The market hits an equilibrium. The high inventory is mostly absorbed thanks to resilient sales and slowing new construction starts.

• Mortgage Rates: Aligning with the NAR forecast, if rates drop closer to the 6.1% average by the end of 2026, the mid-tier housing segment ($350k-$600k) will finally wake up.
• Prices: Prices will stabilize fully by mid-2026, ending the year with modest appreciation somewhere between 1% and 2%. This is much slower than the NAR projection for the US, reflecting the time needed to digest the current housing supply.
• Market Status: The market will transition towards a Balanced Market (3.5 to 4 months’ supply) in many major metros.

Early 2027 Forecast

Normalization and sustainable growth resume.

• Prices: Appreciation will return to historically normal levels, around 3% to 4%. The Texas Housing Market will feel much calmer and more predictable, having flushed out the excesses of the post-pandemic boom.
• Sales: We will see a slight uptick in existing homeowners selling, as the rate gap between their current mortgage and a new one becomes less painful.

In conclusion, the Texas housing market data shows that the turbulence is far from over in 2025, but the market is moving through this correction in a healthy way. Buyers currently hold the power, but anyone waiting for a massive economic crash will likely be waiting too long. This is the perfect window to buy before rates—the “magic bullet” that Lawrence Yun mentioned—reignite overwhelming buyer demand across the state.