Checking In on the Texas Housing Market
The housing market in Texas this year is like sitting in the shade in August: slightly cooler but still very hot—especially compared with the rest of the country.
This year is looking a lot like last year, according to the Texas Real Estate Research Center at Texas A&M University. Lead Data Analyst Joshua Roberson coauthored the center’s latest Texas Housing Insight report, covering data from February. He answered some questions for Texas REALTOR® magazine about what’s going on in the market.
“We are starting to see some slowdown in the pending listings and some increase in the new listings.”
“Everyone is wondering how much further this housing market can continue to grow,” Roberson says. “So far, it’s still growing. Maybe a little bit slower, but compared to 2019 pre-COVID, it’s still a really good year. We are starting to see some slowdown in the pending listings and some increase in the new listings. A little bit more inventory is coming online, but I’m not sure it’s enough for people to really notice quite yet. It may take a little longer for things like price-pressure relief.”
Where’s the ceiling on Texas prices?
The state’s median home price has continued to rise, as it has done consistently since the start of the COVID-19 pandemic in 2020. February was the 21st consecutive month Texas home prices rose. Austin topped the list of Texas metros with an almost $500,000 median price. Dallas-Fort Worth had a median of $375,000, while Houston and San Antonio were above $300,000, according to Texas Housing Insight.
Roberson has been watching the Texas Repeat Sales Home Price Index, which has gone up 31.7% since the beginning of the pandemic. The question is: How much more are prices going to increase?
“Even without rising interest rates, we are seeing that there are limits to price growth,” he says.
“Austin’s price growth, while still ridiculous, is slowing down. That’s certainly not unexpected. There is a limit. People are only going to pay so much for a house.” Houston and Dallas are still growing. Roberson wouldn’t be surprised if they followed Austin’s lead of growth then cooling, albeit less dramatically than the smaller, condensed capital market.
There may be some small decreases in median prices but don’t expect any significant drops. “I think the price levels we’re at now are more reflective of where they’re going to be for a while,” he says.
High demand meets low inventory
Texas had one month of housing inventory in February compared with two-and-a-half months nationwide. The major metros continue to have a limited supply, especially at lower price points. Austin and Dallas-Fort Worth had less than a month of inventory, while Houston and San Antonio had slightly more than a month.
The lack of inventory in Texas is not a new phenomenon. The state faced major housing shortages and affordability issues before 2020, according to Roberson. “Even with record levels of construction activity, we are still facing a decade of underbuilding,” he says.
There are also bottlenecks in the system, Roberson says. “My grandmother lives in North Dallas. She’s still in the house she raised my dad and his brothers in. She would love to get rid of that house, but there is nothing in her price range she could move to. She spent 40 years in that neighborhood and does not want to move to the suburbs.”
Several factors are contributing to the strong demand for Texas homes. The pandemic led to a surge in demand as Texans wanted larger homes and more space. A large cohort of Millennial buyers entered the housing market. Low interest rates enticed buyers into the market. Plus, Texas continues to attract migration from other states.
“We saw a lot of activity in new home construction but also a lot of remodeling. Normally you see one or the other,” Roberson says.
What’s next for the residential market?
The center will have a better picture of 2022 in August, Roberson says, but it’s shaping up to be a good year. He predicts markets will start reaching ceilings for home price growth. There should be more new listings and a slowing down of pending listings.
“I have been hearing anecdotally that homes are starting to take a little longer to sell,” he says. “It’s still a quick turnaround time, but we’re starting to hear those early signs. So I think things are going to level out.”
The elephant in the room will be what it will take to get inflation back in order, Roberson adds. Typically, the more you fight inflation, the more likely you are to go into recession. “Even if we don’t go into recession, I think consumer confidence may slow things down. I think that’ll reflect in housing sales.”
That said, Roberson believes Texas will remain in good shape for whatever the rest of the year holds. The state has weathered downturns and crashes before thanks to its job-friendly environment, affordability, and other factors, he says. “Even with the home price growth we’ve experienced, we’re still relatively more affordable than the coasts.”
Source: Texas REALTOR® Magazine