Recent forecasts and predictions for the Texas real estate market through 2023 and into 2024 suggests that a return to “normalcy” might be ahead. In most cities across the state, home prices are rising at a more sustainable pace compared to the meteoric rise that began during the COVID pandemic.
But the big change right now has to do with inventory. After rising through most of last year, housing market supply declined during the first few months of 2023. If that trend continues, it could influence Texas real estate market conditions well into 2024.
Summary of Real Estate Trends in Early 2023
After favoring sellers for the past couple of years, the Texas real estate market could be moving toward a more “balanced” state. That’s the latest assessment from Texas REALTORS, the state’s Realtor association and trade group.
In May of 2023, the group published their latest “Quarterly Housing Report” with real estate market data and trends for the first quarter of 2023.
According to Marcus Phipps, current chairman for the trade group:
“Last quarter, we saw the Texas housing market shift towards a more balanced state between homebuyers and sellers. The increase in active listings suggests that buyers in many areas have more options to choose from than they’ve had recently.”
This assessment is mostly based on changes that occurred over the past year. But when we drill down to the monthly data since the start of 2023, there’s evidence that competition might be increasing among buyers once again. We’ll get to the Texas real estate market predictions and forecasts in a moment.
But first, some highlights from the Texas REALTORS report, for Q1 2023:
- Statewide, homes spent an average of 64 days on the market before going under contract. That was 27 days longer than the first quarter of 2022, indicating a slowdown in real estate market activity.
- The median sales price for Texas homes reached $326,800 during the first quarter of this year, a modest 0.6% increase over the same period last year.
- During the first quarter, 72,480 homes were sold in Texas, a 17% decrease compared to the first quarter of last year. More than half of those sales occurred within the $200,000 – $399,000 price range.
- Months of inventory (a supply level indicator) increased from 1.1 months last year to 2.7 months in the recent report. This means there were more properties listed for sale at the start of 2023, compared to a year earlier.
As mentioned above, home prices across the state of Texas remained relatively flat over the past year or so. This is another sign that the real estate market has cooled down in 2023, compared to the more heated pace of the previous two years.
Even so, current indicators suggest that there is still strong demand within most housing markets across the state of Texas. The Austin metro area (an anomaly compared to the rest of the state) might be an exception to that statement. More on that below.
Texas Housing Market Forecast 2023 – 2024
So that’s where the Texas real estate market is right now, as we approach the summer of 2023. But where is it headed? What’s the general outlook and forecast for the Texas housing market through this year and into 2024?
While no one can predict future trends with complete accuracy, we can make some “educated guesses” based on current factors affecting the market. With that in mind, here are five predictions for the Texas real estate market extending into 2024.
Home prices will probably level off for a bit, and then resume rising at a more normal pace through the second half of 2023 and into 2024. This “leveling” period began toward the end of 2022 and could continue into the summer of 2023.
Inventory levels will probably continue to decline over the next few months, as they have since the start of 2023. Several factors are driving this trend, including higher mortgage rates and reluctant sellers. But overall, there should be more homes available for buyers during the second half of 2023 and into 2024, compared to the previous two years.
The Texas housing market will be more balanced throughout the rest of this year and into next. In most cities across the state, fierce bidding wars and offers well above the asking price are becoming a thing of the past.
The Ups and Downs of Inventory
Housing inventory conditions have a lot to do with current trends and future forecasts for the Texas real estate market. And we can summarize these trends in a single sentence:
Inventory levels plummeted during the COVID pandemic, increased substantially in 2022, and started to decline again during the first few months of 2023.
You can see all of this within the chart below. It shows the months of supply within the Texas real estate market (statewide) since just before the pandemic started.
Generally speaking, a balanced market will have four to six months of supply. In a more balanced real estate scene, supply and demand are about the same, and home prices rise in line with long-term historical averages.
So where does the Texas housing market fall in all of this?
As you can see from the above chart, the Texas real estate market was somewhat balanced going into 2020. But then the COVID pandemic came along, fueling a sharp rise in home-buying activity nationwide. This caused inventory levels to plummet into the second half of 2020, as shown in the chart.
In 2022, the pendulum swung in the opposite direction, with more and more homes coming onto the market. This was partly due to a general cooldown brought on by higher house values and mortgage rates.
The next reversal occurred during the first few months of 2023, when supply levels began to drop again. And that brings us up to our forecast for the Texas housing market.
If inventory continues to decline into the second half of 2023, the Texas real estate scene could once more become highly competitive for buyers. This would also put upward pressure on prices going into next year.
Construction Permits Indicate Supply Growth
We can’t talk about inventory levels without examining construction trends. After all, the new home construction of today contributes to the inventory levels of tomorrow. And the current trend suggests steady growth ahead.
According to a May 2023 report from the Texas Real Estate Research Center (a non-profit research institute at Texas A&M University), new home construction is currently skyrocketing across the state.
To quote that report:
“Single-family construction permits have continued increasing since February with 12,431 issued in March, a 23 percent month-over-month (MOM) improvement. All four major metros contributed to the statewide rise, as they all had positive gains for the month.”
The Houston metro area, in particular, could soon experience an explosion in new construction over the coming months. Construction permits in that metro rose by nearly 21% during the one-month timeframe mentioned above, with 4,616 new permits being filed.
A construction permit is a document issued by a local government that authorizes the construction of a new building. A high number of construction permits indicates that there is strong demand for new homes.
Of course, there’s often a significant lag time between the filing of construction permits and the actual building of the homes. So the recent rise in permits won’t have an immediate impact on the Texas real estate scene. But it could significantly increase supply levels by 2024, creating a more favorable housing market for buyers.
Revisiting the ‘Austin Anomaly’
In a sense, current real estate trends and housing market forecasts for Texas can be separated into two categories. There’s the state of Texas as a whole — and then there’s Austin.
During the pandemic, Austin-area home prices rose faster than any other part of Texas. For a while there, this market was posting year-over-year price gains of more than 30%, unprecedented at the time.
There’s an obvious reason for these housing market extremes — population growth.
Even before the “Great Migration” that occurred during COVID, the Austin metro area population was growing rapidly. The pandemic simply shifted that growth into overdrive, with a flood of home buyers entering this market from other parts of the country.
According to a report from city officials:
“For the 12th consecutive year, the Austin-Round Rock-Georgetown metro area was the fastest-growing region in the country, among large metros. The Austin metro area added nearly 63,000 residents between 2021 and 2022, growing at a rate of 2.7%.”
According to the latest data from Zillow, the median home value within the Austin area has declined steadily since the fall of last year. Some economists believe prices have further to fall within the Central Texas region, before finding a “bottom.”
Earlier this year, researchers from Redfin ranked Austin as the fastest-cooling housing market in the country, calling it “a victim of its own popularity.”
So when we make real estate forecasts and predictions for Texas stretching into 2024, we can place a big, bold asterisk by the Austin metro area. It still has a ways to go.
Positive Outlook for the Texas Housing Market
The state of Texas has a long history of steady and stable price growth. Even during times of recession and economic downturns, home values in the state have held up well.
You can see this in the chart below, which shows the home value index for Texas going back decades. For example, notice how prices remained fairly stable during the Great Recession that stretched into 2009 (shown here as a gray shaded bar).
Granted, home prices in some real estate markets across Texas have declined a bit since their pandemic peaks. But that’s likely a short-term “correction” that will eventually transition into a period of slow and steady growth.
So there you have it, our forecast for the Texas real estate market through 2023 and into 2024. In closing, we would like to offer the following (and somewhat obvious) disclaimer.
Note: This material has been provided for informational purposes only. The Home Buying Institute makes no claims or guarantees about future real estate trends.
Brandon Cornett is a veteran real estate market analyst, reporter, and creator of the Home Buying Institute. He has been covering the U.S. real estate market for more than 15 years. About the author