The Texas housing market is certainly a fascinating one to explore in 2023. Using several statistics, we explore the Texas houisng market and where it's heading. The lack of inventory continues to inflate Texas housing prices for now, but many analysts predict that the rate of appreciation will slow down as compared to the last two years.
Texas has approximately 1,700 cities with populations ranging from 2.3 million to less than 100 people. According to PwC and the Urban Land Institute's Emerging Trends in Real Estate 2022 research, Texas has four of the top twelve markets with the highest house-building prospects.
According to Zillow, the typical home value in Texas has dropped by 0.4% over the last twelve months. It stands at $303,971 (ZHVI). But properties in Texas are still in high demand, with homes typically going pending in around 14 days. This swift pace of pending sales reflects the competitive nature of the market and the strong interest from potential buyers.
Texas Housing Market Trends 2023
The Texas housing market has been a topic of great interest and speculation as it experiences fluctuations and adjustments in various aspects. Here is the recent report from the Texas Real Estate Research Center at Texas A&M University which shows the Texas housing market trends for June 2023.
Despite fluctuations in the housing market, Texas continues to exhibit resilience. The shift towards new construction, rising demand for permits, and steady price gains all indicate a healthy real estate market in the Lone Star State. While challenges remain, such as high mortgage rates, the Texas housing market remains robust and adaptable.
The Housing Market Landscape
Contrary to investors' fears, the “housing bubble” did not burst. Instead, a harmonious decline in both supply and demand has struck a balance, resulting in a boost to the housing median price. Throughout the first half of 2023, Texas' median price has consistently shown a 0.3-0.4 percent growth every month.
Due to current owners' reluctance to sell their existing property, the demand for new construction has significantly increased. This preference shift led to a swift climb in the market share of new construction, which surpassed 20 percent in June.
Active Listings Rebound
The number of active listings rose for the first time since November 2022, reaching 82,064 units after a 3.9 percent month-over-month (MOM) growth. However, none of the Big Four metros recorded a positive monthly gain. The boost of available homes primarily came from the smaller housing markets, such as El Paso, Killeen, Midland, and Texarkana.
The number of new listings increased by 6.7 percent to 40,800 units, accounting for half of active listings. All major metros bucked the trend of acceleration with growth ranging from 3.3 percent to 8.9 percent. Correspondingly, months of inventory (MOI) had a marginal gain of 0.1 months.
Construction Permits and Starts
Regarding the upcoming inventories, Texas' single-family construction permits had their second decline in three months, dropping by 2 percent in June. While the number of permit applications has significantly shrunk from the frenzy of applications during the pandemic, permit issuance seems to be returning to the ten-year trend before the pandemic.
At the metro level, Houston had the largest demand for permits with 4,500 issuances in June, maintaining the same level as in May. Dallas and Austin both had a mid-single-digit reduction, falling to 3,480 and 1,040 units, respectively. In contrast, San Antonio's permit demand was rising this year, jumping from 500 units in January to 840 units in June. Permit demand remains significant in the Texas housing market.
Despite the fall in permits, single-family construction starts rose for the third consecutive month to 11,240 units. Both Dallas and Houston had more than 3,500 houses break ground, surpassing the combined total of other metros outside the “Big Four.” The overall trend indicates a positive momentum in the Texas single-family construction market.
Market Value and New Construction
The state's total single-family starts value reached $15.9 billion year-to-date (YTD), indicating a decline from $23.2 billion recorded in 2022. Houston and Dallas continue to account for more than half of the state's construction activity values. Dallas' share of the Texas market rose to 27.5 percent, coming close to Houston's share of 28 percent.
As mortgage rates remain elevated, homebuyer demand has decreased, leading to a drop in Texas' total home sales, which fell below 28,000 transactions in June. This represented a decline of 3.2 percent MOM and 11.8 percent year over year (YOY).
Rise of New Construction Sales
Despite the challenge of high mortgage rates and reduced housing demand, the market share of new construction sales surged. Within a year, the share of new construction sales rose from 16.3 percent to more than 20 percent, indicating every five closed listings is a new home. Both demand and supply factors contributed to the increasing trend for new homes.
Texas' average days on market (DOM) stayed at 56 for the second straight month, deviating from the steep rebounding trend observed for over a year. The current reading is merely three days short of the five-year average before 2020, which stood at 59 days.
Steady and Modest Price Gains
Texas' median home prices continued to show its strength by increasing 0.3 percent to $337,900. Austin recorded the largest monthly gain of 4.2 percent, reaching a price peak in the past nine months.
The Texas Repeat Sales Home Price Index, which accounts for compositional price effects and provides a better measure of change in single-family home values, showed a slight advance of 0.3 percent MOM and 0.1 percent YOY.
Interest Rates Impact
Mortgage rates typically follow Treasury rates, and both increased in June. The ten-year U.S. Treasury Bond yield grew 18 basis points, reaching 3.8 percent. Likewise, the Federal Home Loan Mortgage Corporation's 30-year fixed-rate increased moderately to 6.7 percent, up 28 basis points. With the Fed resuming their increasing of interest rates in July, both the bond and the mortgage rates also grew.
Texas Housing Market Predictions 2023 – 2024
Texas has had some of the strongest housing appreciation rates in the country over the past decade. Over the past decade, Texas housing prices have risen 214.12 percent, which equates to an annual home appreciation rate of 5.10 percent, according to the data collected by NeighborhoodScout. If you are a house buyer or real estate investor, Texas has been one of the finest long-term real estate investments in the United States over the past decade.
The Texas housing market has been through various shifts and adjustments, with fluctuating home values and changing market dynamics. As we look into the future, it's essential to consider the latest predictions and forecasts to gain insights into what lies ahead for homebuyers and sellers in Lone Star State.
With data from Zillow, we can gain valuable insights into the current state of the market and make predictions about its future trajectory. As of July 31, 2023, the average home value in Texas stands at $301,763, reflecting a 1.0% decrease over the past year. Homes in Texas are also selling quickly, going pending in approximately 16 days.
Here are some key statistics that provide a snapshot of the Texas housing market:
- Median Sale to List Ratio (June 30, 2023): 0.997
- Percent of Sales Over List Price (June 30, 2023): 27.2%
- Percent of Sales Under List Price (June 30, 2023): 51.0%
- Median Days to Pending (July 31, 2023): 16
Top 10 MSAs in Texas for Home Price Growth by July 2024
Looking ahead, let's delve into the predictions for the top 10 Metropolitan Statistical Areas (MSAs) in Texas for home price growth by July 2024. These MSAs are expected to see significant increases in home prices based on data available up to August 31, 2023.
- Rio Grande City, TX MSA: With a promising growth rate of 16.3%, Rio Grande City is poised for substantial home price appreciation by July 2024.
- Jacksonville, TX MSA: Jacksonville is expected to experience a notable increase in home prices, with a growth rate of 11.4% projected by July 2024.
- Mineral Wells, TX MSA: Despite a slight decline earlier, Mineral Wells is on track for a resurgence, with an expected growth rate of 8.8% by July 2024.
- Stephenville, TX MSA: Stephenville is forecasted to see a solid growth rate of 8.6% in home prices, making it an attractive market for potential buyers and investors.
- Raymondville, TX MSA: Home prices in Raymondville are expected to rise by 8.5% by July 2024, offering potential opportunities for real estate growth.
- Hereford, TX MSA: Hereford anticipates a 7.9% increase in home prices, making it one of the regions with strong growth potential.
- Mount Pleasant, TX MSA: Mount Pleasant is projected to experience a 7.5% growth in home prices, indicating a positive market outlook.
- Corsicana, TX MSA: Corsicana is set to see a 7.4% increase in home prices, attracting attention from both buyers and sellers.
- McAllen, TX MSA: McAllen's housing market is expected to grow by 7.3%, offering opportunities for real estate investment.
- Gainesville, TX MSA: Gainesville rounds out the top 10 with a projected growth rate of 7.3%, showcasing the overall strength of the Texas housing market.
These predictions indicate that several MSAs in Texas are primed for significant home price appreciation in the coming months. However, it's essential to keep in mind that the real estate market can be influenced by various factors, and these projections are subject to change. As always, it's advisable for buyers, sellers, and investors to stay informed and work with real estate professionals to make well-informed decisions in this dynamic market.
Texas Employment Situation
Home sales are typically intimately related to the health of an economy and increase and decrease in tandem with economic activity. As economies decline, the money supply becomes more constrained. As it gets more difficult to obtain money, fewer house buyers enter the market. With fewer buyers accessible due to stricter credit criteria, inventories of houses rise or take longer to sell. Price decreases when there is more product supply and less demand for it.
As recession fears persist, inflationary pressures and uncertainty show that the outlook for the Texas economy in 2023 is mixed. The Texas economy is experiencing mixed fortunes, with the inflation rate decreasing but still high at 6.5%, a drop in home sales, and slow job growth, though the unemployment rate is down to 3.9%.
The goods-producing sector created 8,300 jobs, led by mining, logging, and construction, which accounted for 2,800 new employees, and manufacturing, which added 5,500 workers to the payroll. Private employees' average nominal earnings increased to $30.53, but inflation continued to offset the nominal wage increases, resulting in a decrease in real wages. Inflation reduction measures are expected to ease in 2023, but recession fears continue to be a concern. Despite stubborn inflation growth and overall economic uncertainty, the Texas economy has remained robust.
Energy Sector
The energy sector is one of the main drivers of the Texas economy, and it has experienced significant volatility over the past few years. The price of crude oil has been volatile, which has had a significant impact on the energy sector's overall health. While the price of crude oil has decreased in recent months, it remains higher than it was in 2021, which has helped to stabilize the industry. Additionally, Texas is the leading producer of natural gas in the country, and the price of natural gas has also been volatile in recent months. However, the price has decreased since its peak in August, which has helped to mitigate some of the negative effects on the industry.
Housing Market
The housing market in Texas has been relatively stable over the past few years, but there have been some recent signs of weakness. Total home sales volume has decreased significantly, which is likely due to rising interest rates and overall economic uncertainty. While the housing market in Texas remains relatively strong compared to other states, it is worth monitoring for signs of further weakness.
Employment
Texas has been one of the fastest-growing states in terms of job growth over the past few years, and this trend has continued in recent months. However, there are signs that job growth may be slowing, which could be a cause for concern. Additionally, while the unemployment rate has decreased, the number of Texans filing initial unemployment claims has increased significantly, which could be a sign of weakness in the labor market.
Overall Economic Outlook
The overall economic outlook for Texas remains positive, but some potential headwinds could cause problems. Inflation continues to be a concern, and while it is expected to moderate in 2023, it could still cause problems for consumers and businesses alike. Additionally, the potential for a recession is a concern, as there are signs that the economy may be slowing.
Conclusion
In conclusion, the Texas economy is currently facing some challenges, but it remains relatively strong compared to other states. The energy sector continues to be a major driver of growth, but it is subject to volatility. The housing market is showing signs of weakness, but it remains relatively stable. Employment growth has been strong, but there are signs that it may be slowing. Overall, the economic outlook for Texas remains positive, but some potential headwinds could cause problems in the future.
Top 10 Places to Buy a House in Texas
According to Niche.com, these are the top 10 areas to buy a home based on home valuations, property taxes, homeownership rates, housing prices, and real estate trends. The ranking is based on statistics from the United States Census Bureau, the FBI, and other sources. Cottonwood Creek South is the best place in Texas to buy a house.
- Cottonwood Creek South, a neighborhood in Richardson, TX
- Arapaho, a neighborhood in Richardson, TX
- Lakeside City, TX
- Fulshear, a town in Fort Bend County, TX
- Canyon Creek South, a neighborhood in Richardson, TX
- Heights Park, a neighborhood in Richardson, TX
- Shady Hollow, a suburb of Austin, TX
- Red Lick, Bowie County, TX
- Woodway, a suburb of Waco, TX
- Timberbrook, a neighborhood in Plano, TX
Top 10 Texas Cities Having Highest Real Estate Appreciation Rates Since 2000
According to Neighborhoodscout.com, these are the top ten cities in Texas that have had the highest real estate appreciation since the year 2000.
- Westworth Village
- Gustine
- Balmorhea
- Garden City
- Mico
- Runge
- Granger
- Encinal
- Falls City
- Wingate
Sources:
- https://www.zillow.com/tx/home-values/
- https://www.redfin.com/state/Texas/housing-market
- https://www.recenter.tamu.edu/articles/technical-report/Texas-Housing-Insight
- https://www.neighborhoodscout.com/tx/real-estate
- https://www.niche.com/places-to-live/search/best-places-to-buy-a-house/s/texas/
- https://www.fhfa.gov/DataTools/Tools/Pages/Four-Quarter-Heat-Map.aspx
- https://www.fhfa.gov/AboutUs/reportsplans/Pages/Fannie-Mae-Freddie-Mac-Reports.aspx
- https://www.recenter.tamu.edu/articles/technical-report/outlook-for-the-texas-economy
