A brief summary
The housing markets across the country have all seen a major impact from the pandemic, and this year the experts were predicting house prices to level out. Texas is one of the strongest economies in the country and retains a strong housing market. In light of the previous predictions, let’s take a closer look at the Texas housing market predictions for 2022.
Texas Housing Market Predictions 2022 - Key Points
The Lone Star State has been a popular choice for home buyers for many years, however the pandemic led to a major increase in the price of houses in this state, amongst many others. The higher prices have therefore made it harder for many people to buy a house.
While the state continues to be a real estate hotspot thanks to its great quality of life and lower cost of living, there are some changes happening that could impact the housing market in a big way by the end of 2022. Here are our Texas housing market predictions for 2022.
Texas home prices
Home prices in Texas, along with may other areas of the US, simply sky-rocketed in 2021. Due to the good quality of life that Texas provides, and the lower cost of living, people and businesses from all over the US are moving to the state. Companies like Charles Schwab, IBM and Dell all have offices in Texas and as more people continue moving to the state, this helps to drive house prices upwards.
The extra low mortgage rates, the fact that there’s no state income or inheritance tax, and the robust job market, means that people have been flocking to Texas for a while. The state also had a population boom recently, so this influx of home buyers meant the supply wasn’t quite matching the demand and home prices shot up. In fact, out of the 25 largest metros in Texas, 21 reported median house price increases that hit double digits, according to the Texas Realtors.
Luis Torres, research economist at the Texas A&M Real Estate Research Center, talks about the house price rise saying,
You've seen such strong demand due to historical low mortgage rates. I think that was a major contributor — seeing strong demand — and facing weak supply, well that pushed up home prices at a very, very high rate.
The Austin-Round Rock area experienced the highest year-over-year increase in median home prices, hitting $450,000, which was a 30.8% rise. The Brownsville-Harlingen area followed with a 24.4% to hit $215,000.
2022 has been a slightly different story as house price growth continues, but the housing market begins to cool off. While inventory continues to be an issue, this is nothing new for Texas, as the state has had a lack of inventory in the real estate industry since the last financial crisis in 2008.
The Texas Repeat Sales Home Price Index showed further significant growth in Dallas and Fort Worth, with 27.7% and 25% increases respectively, as home-price appreciation continued its upward trajectory this year.
Texas housing market statistics
Median Sales Price
$349,000
Average Days on Market
30 Days
Housing Affordability Index
80
Home Sales (April 2022)
34,000
Population Size
4.5million
Median Household Income
$74,000
Mortgage Rates (30-Year Fixed)
5.69%
Unemployment Rate
4.2%
According to ATTOM data, Harris county in Texas, has 4.5 million people, home price growth is outpacing wage growth with the only other county in the US with higher price growth compared to wage growth being LA.
Home ownership costs are 20% of the average wages, which is still lower than the 28% national average, and this means that it’s still more affordable to buy a house on Texas wages.
The median household income levels in Texas, are around $74,000. Which is higher than the national average.
Texas is sitting at 80 on the housing affordability index, which means that it’s less affordable than the historic average, as per the Texas Housing Insight by Texas real estate research center for April 2022.
According to the Multiple Listing Service (MLS), there were around 39,000 home sales in January in Texas, and this fell to 34,000 by April. Houston had 9,500, Dallas had 5,800 and Austin, Fort Worth, and San Antonio all had around 3,000.
Houses were on the market for an average number of 30 days, and they sold for a median price of $349,000. This is a far cry from the median sales price in 2005 which was $125,000. House prices have gone up almost 25% in the last year.
* All resources for this data are listed at the bottom of the article
Predictions for Texas housing market in 2022
With major house price growth and the national mortgage rate hikes of close to 2% over the last year, buying a house is becoming more difficult. Particularly for people buying a house for the first time.
Luis Torres’ predictions for 2022 support this, “A lot of people are going to find themselves priced out. Affordability is going to be an issue and that should weaken demand in 2022 to more sustainable levels than we saw before the pandemic,”. Thanks to an increased demand however, it’s likely that the future of real estate after the Covid-19 pandemic is not all doom and gloom.
In April the demand for building permits for future single-family homes decreased for the second month. For now, the rising mortgage rates are slowing home price growth and cooling the red-hot housing market in Texas. Sales have shifted towards higher priced homes, as there is a lack of inventory amongst lower priced homes on the market, which has contributed to the rise in home prices.
The Federal funds rates are expected to increase a few more times this year. Federal Home Loan Mortgage Corporation’s 30-year fixed-rate, sat around 3% for many years, then shot up to 4.98% in April and has continued its upward trajectory. This can only lead to a cooling of the housing market in all areas of the US, including Texas.
Where to find affordable housing in Texas
Texas has 1,700 cities, with populations that range from the hundreds to the millions. The most popular county in Texas, Harris county, was once one of the most affordable areas to purchase and own a home, but that is no longer the case according to ATTOM data. While Houston, Dallas, and Austin are the biggest cities, the affordable housing markets lie outside of these in smaller towns. Here are 3 areas with the most affordable housing in the state:
Brownsville
One of the most affordable places to live in Texas is the city of Brownsville. It borders Mexico and is ideal for those looking for a starter home, an affordable investment property to rent out, or for young professionals. The University of Texas Rio Grande Valley is located in this city, and with a population of 182,110 the city has a relatively low unemployment rate of 5.3%. The median purchase price is $83,800, which offers home buyers great value for money.
Galveston
This beach town has a smaller population of just 49,443 and is a lesser-known town than its big city counterparts. However, here you’ll find beachfront properties with a median price of $154,400, and an unemployment rate of just 5.6%. Galveston is one of the most affordable places to buy property in Texas, making it a great place for first-time home buyers or investors who are looking for a cheaper alternative.
El Paso
El Paso has a population of 678,058 with an unemployment rate of just 4.5%. At the intersection of the Texas, Mexico and New Mexico borders, this city offers plenty of employment opportunities and a median house price of $119,300. El Paso is an affordable option for anyone who is looking to experience the magic of Texas, without breaking the bank.
Hottest housing markets in Texas
For real estate investors or home buyers who are looking for bustling housing markets in Texas, Dallas and Austin are currently showing loads of activity.
Dallas
Dallas is ranked by the National Association of Realtors (NAR) as one of the top 10 markets for 2021-2022. The recent report from the Texas Real Estate Research Center (May 2022) shows that single-family homes in Dallas increased in price by 22% year-over-year and inventory increased from a 1 month supply to a 1.2 month supply of houses.
The report shows that the median sales price of a single-family home in Dallas is currently $430,000. Preston Hollow is the most expensive neighbourhood in Dallas, while the most affordable is Pleasant Grove, which has a median home price of $218,500 according to Realtor.com. Dallas has experienced a 30.3% rise in home values over the last year, which further illustrates the booming housing market in this area.
Austin
Before the pandemic, Austin made it to number 38 of Realtor.com’s list of 50 Hottest Zip Codes for 2020, showing off as one of the country’s most vibrant housing markets. Now, the city has hit new highs on median prices for homes, according to the Austin Board of Realtors (AboR), with the Austin-Round Rock metro hitting $550,000 in May 2022. This is an increase of 21% year-on-year.
However, Austin has also seen a rise in inventory, which is good news for the bustling city. There was an increase of 146% (year-over-year) in active house listings in the city. To which Cord Shiflet, 2022 ABoR president, commented
The increase in inventory that we’re seeing is helpful for buyers who have had a hard time finding a home these past two years.
Adam Perdue, a research economist at the Real Estate Center at Texas A&M University said that “this slight increase in inventory and active listings point to the market beginning to normalize,”. It would seem that the Austin housing market remains robust amidst the current market turmoil.
The bottom line
The Lone Star State, along with most of the US, is likely to experience a market cooling this year, however perhaps not as much as the rest of the country, as illustrated by the decline over the last year. The state’s house prices have increased more than the national average, but the median sales price of houses is still more affordable than the average for the country. The cooling of the Texas real estate market is not as steep as the rest of the country and this state is likely to remain a desirable place to live.
FAQ
Home prices are expected to level off in 2022 and they aren’t predicted to decline too drastically, so they should still remain higher than they were in 2020. In other words, home prices will not be dropping, but most likely just levelling off in 2022.
The housing market in Texas in 2023 is expected to grow and house prices in Texas may continue to rise. Fannie Mae predicts that across the US home prices will rise by 4.2% in 2023, due to a lack of inventory this year house prices haven’t decreased as much as expected.
The housing market in Texas is likely to remain strong and housing sales are expected to increase, however this may lead to less affordable houses on the market overall. While Texas is leading the charge in the house price surge across the country, this is not to say the state is in a housing bubble. In fact, according to Moody’s Analytics chief economist Mark Zandi, we’re not living in housing bubble just yet.
While interest rates might rise next year, they should still remain relatively low. However, home prices are predicted to remain high for a while, which includes Texas. Whether it’s a good time to buy a house in Texas now or not depends largely on each person’s situation.
Texas has one the strongest economies in the country, and in fact the world, and the cost of living in Texas is more affordable. Houses are also more affordable thanks to the large availability of vacant land, low tax rates, less stringent building regulations, and available building supplies.
*Resources used for this article: ATTOM data, Texas Realtors, Herald Banner, Zillow, Texas real estate research center, National Association of Realtors (NAR), Realtor.com, Extraspace.com, Austin Board of Realtors, Bankrate, Bureau of Labor statistics