5 Key Predictions for the Texas Real Estate Market in 2025

On this page: A review of current real estate market trends in Texas with a forecast extending into 2025, updated quarterly with the latest statistics.

After years of unprecedented home-price growth and intense competition among buyers, the Texas real estate market has settled into a new normal. And it favors buyers more than sellers.

Over the past year, housing markets across Texas have experienced a significant increase in the number of homes for sale. This has given buyers more properties to choose from while easing the overall competition for homes.

5 Predictions for the Texas Housing Market

Looking forward, real estate market forecasts for Texas extending into 2025 suggest that we could see more of the same.

Home prices are expected to remain flat or rise modestly, while buyers could enjoy a more relaxed market pace and more negotiating leverage.

Here are five data-supported predictions for the Texas housing market in 2025:

1. Home buyers will have more properties to choose from.

Let’s start with some good news for home buyers in the Lone Star State.

Statewide, the number of active real estate listings in Texas has increased steadily over the past year. There are more homes for sale today than a year ago, and therefore a greater chance of success for buyers.

Most housing markets across Texas have gained inventory over the past year. But the amount of growth varies from one city to the next.

According to an August 2024 report from Texas REALTORS®:

“While a few metros had inventory numbers economists consider a balanced market (6 to 6.5 months of inventory), most areas of Texas still recorded inventory levels below that number, indicating that an adequate supply of housing continues to be a concern.”

The figures below show the increase in the number of active real estate listings from July 2023 to July 2024, according to Realtor.com. As you can see, all of Texas’s major metros have experienced significant inventory growth over the past year—but especially Dallas.

• Austin-Round Rock-Georgetown: +30.7%
• Dallas-Fort Worth-Arlington: +51.5%
• Houston-The Woodlands-Sugar Land: +35.3%
• San Antonio-New Braunfels: +45.4%

Some economists have predicted that even more homes could come onto the market through the remainder of this year and into 2025.

Prediction takeaway: The Texas real estate market has more homes available for buyers these days, and that trend could continue into 2025. That would make it easier for buyers to find a suitable property within their budgets.

2.  Home prices in most cities will remain flat or rise modestly.

Home prices in Texas rose sharply during the pandemic years of 2020 and 2022, as they did in most parts of the country. COVID led to a rise in remote work and gave many Americans a newfound freedom to relocate wherever they wanted.

Many of those folks relocated into Texas cities, snatching up homes and boosting prices like never before.

But that was then, and this is now: As of summer 2024, home prices in most Texas real estate markets have either slowed down, flatlined, or declined from their previous peaks.

The graph below shows the median home price for the state of Texas over the past few years, based on data provided by Zillow.

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You’ll notice several trends in the above graph:

• The sharp rise in prices corresponding with the pandemic years.
• The all-time record high of $313,000 during the summer of 2022.
• The shallow downturn that followed, as the market cooled.
• The relatively flat line (no growth) over the past year.

At the metro level, these trends have been mixed. In the Dallas-Fort Worth and Houston areas, home prices rose modestly over the past year or so. But in the Austin and San Antonio housing markets, house values are still dropping.

Zillow recently issued updated forecasts for major real estate markets across Texas. They predicted that home prices would either remain flat or dip slightly in all major metros.

Here are their price predictions for July 2024 to July 2025:

• Austin-Round Rock-Georgetown: -2.7%
• Dallas-Fort Worth-Arlington: -0.3%
• Houston-The Woodlands-Sugar Land: -1.1%
• San Antonio-New Braunfels: -1.7%

Prediction takeaway: These projections convey an important point. In many Texas markets, the current supply-and-demand situation could produce little to no price growth for the foreseeable future.

3. Lower mortgage rates could stimulate the market.

Our next market forecast for 2025 brings mortgage rates into the picture. Mortgage rates have trended downward over the past four months, with the average rate for a 30-year fixed mortgage currently hovering near 6.5% (Aug. 2024).

Many analysts expect the Fed to reduce the federal funds rate at their September meeting, due to falling inflation. That would likely cause mortgage rates to drop as well.

Lower rates could prompt hesitant home sellers to finally list their properties, bringing more homes onto the market. It could also bring more buyers off the bench, increasing competition within the real estate market.

Historically, we tend to see an increase in home sales when interest rates drop over a sustained period. And that’s a realistic preview of what could happen during the fall and winter months.

In their latest Housing and Mortgage Market Outlook published in August, researchers from Freddie Mac wrote the following:

“With the backdrop of favorable inflation data and a softening labor market, we anticipate the Federal Reserve to initiate rate cuts sooner rather than later … As a result, we forecast mortgage rates to gradually decline in the coming quarters.”

Prediction takeaway: The future could bring lower mortgage rates, which in turn could increase housing market inventory and boost home sales across Texas into 2025.

4. Buyers will have more negotiating leverage than in the past.

During the summer of 2024, more than 35% of homes listed for sale across Texas had a price reduction. This scenario occurs when a seller lists their house at one price, and later reduces it due to a lack of offers.

Price reductions have increased significantly since the COVID years (when they were practically non-existent). These and other metrics indicate that Texas home buyers have more negotiating leverage now than they did a couple of years ago.

Researchers predict that inventory levels will rise further over the coming months. Such a trend would create even more favorable market conditions for home buyers in 2025.

The graph below shows the percentage of homes in Texas that sold above the asking price, going back several years.

You can see how that percentage skyrocketed during the COVID-fueled real estate market frenzy—and how much lower it is today. This provides further evidence of the ongoing shift from a strong seller’s market to something resembling a buyer’s market.

Prediction takeaway: In 2025, Texas home buyers could have more negotiating leverage and bargaining power than they’ve had for quite some time. Maybe not a classic buyer’s market, but something close to that.

5. Migration patterns will continue to drive demand.

Texas has been a popular destination for out-of-state movers in recent years, especially those from pricier states like California and New York. The Lone Star State offers lower taxes than many states, more affordable housing, and a strong job market.

From 2000 to 2020, the population of Texas grew by 8.3 million, a whopping 40% increase. That was the largest numerical increase of any U.S. state during those two decades.

Natural population growth (births outpacing deaths) accounted for about half of that growth, while domestic migration brought roughly a third of it.

Starting in 2020, the COVID pandemic turbocharged this growth trend. It also ushered in a new era of remote work, giving Americans more freedom and flexibility as to where they want to live.

By increasing the demand for housing, steady population growth could also lead to increased development in less populated areas. It could expand the boundaries of urban sprawl and lead to higher property values over time.

Prediction takeaway: Migration into Texas will continue to influence the real estate market in 2025, particularly in suburban areas. Population growth will increase housing demand and eventually get home prices moving north again.

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5 Frequently Asked Questions From Buyers

We receive a lot of reader questions regarding market trends and related subjects. Below, we’ve provided some timely answers to five of the most common questions, specific to Texas.

1. Is the Texas housing market going to crash in 2025?

In short, no. This market won’t crash anytime soon.

A real estate market crash occurs when property values drop rapidly and substantially over a prolonged period. It’s when home prices “plummet,” usually after a period of overheated and unsustainable growth.

But that’s not the situation in Texas, as we head into 2025.

Granted, home prices in Texas have declined a bit over the past 18 months. That’s what economists refer to as a “market correction.” Home values rose too much, too fast during the pandemic years, and then dropped again as the market cooled. It’s a normal cycle.

The Texas real estate market is actually better protected from a “crash” scenario, when compared to many other parts of the country. With steady population growth, limited speculation, and a strong job market, Texas is one of the most stable housing markets in the U.S.

There’s one glaring exception to all of this: the Austin metro area.

The housing market in Austin, Texas has experienced a major drop in home values over the past two years. And it probably has further to fall. This is a direct result of the Central Texas home buying frenzy that occurred during the early pandemic.

The median home price in Austin has dropped by more than $100,000 since the summer of 2022. So you could call that a “crash” scenario.

The Austin real estate market will sort itself out over the next year. And it might never experience another bubble-and-bust scenario like the one it just went through.

As for the state of Texas as a whole, a real estate market crash in 2025 is highly unlikely.

2. What will the real estate market be like next year?

The market could heat up a bit during the first half of 2025. We will likely see an uptick in housing market activity, as more and more home buyers come off the sidelines.

Mortgage rates have a lot to do with this prediction.

Mortgage rates have dropped considerably over the past few months, with additional declines likely as we move into 2025. These and other factors could bring more buyers into the real estate market, increasing competition and accelerating sales.

Overall, however, the market will mostly favor buyers in 2025, rather than sellers. It will likely remain “cool” and moderate. So don’t expect any bidding wars anytime soon.

3. Will 2025 be a good year to buy a home in Texas?

This depends on your personal financial situation, your long-term goals, and where in Texas you’re planning to buy a home.

Generally speaking, the Texas real estate market offers stable investment opportunities for home buyers. It’s a slow-growth kind of market that usually (emphasis on usually) avoids the extreme cycles seen in other parts of the country.

So a Texas home purchase could be viewed as a “solid investment.”

But as we’ve seen, there are exceptions to this rule.

In the Austin area, for example, many home buyers have adopted a watch-and-wait mentality for the time being. And rightfully so. With home values in that market still declining, it doesn’t make much sense to buy a home yet.

Anomalies aside, the Texas housing market is currently entering the “bottom” of a real estate cycle with regard to home values. This gives buyers an opportunity to purchase a property at rock-bottom prices and possibly enjoy many years of equity growth.

Even so, home buyers should evaluate their financial situation and long-term goals, to determine if 2025 is the right time to buy a home in Texas.

4. Will home prices rise or fall next year?

This will vary from one local housing market to the next. Statewide, the median home price for Texas probably won’t see much movement during 2025. Maybe a small uptick, at most.

At the local level, it will be much more varied.

Home prices in some Texas housing markets could remain flat over the next year. While other cities could see a modest increase or decrease. It’s uneven because the real estate market is still resetting from the tumult of the previous four years.

As of September 2024, Zillow was offering the following home-price forecasts for the major real estate markets in Texas (metropolitan areas):

• Austin-Round Rock-San Marcos: -2.1%
• Dallas-Fort Worth: 0.0%
• El Paso: +2.2%
• Houston-The Woodlands-Sugar Land: -0.7%
• McAllen-Edinburg-Mission: +3.4%
• San Antonio-New Braunfels: -1.3%

These predictions cover the 12-month span from August 2024 to August 2025.

5. What challenges might affect home buyers in 2025?

For many home buyers, affordability will likely be the biggest challenge in 2025. Despite the post-pandemic reset mentioned above, home values in Texas are still significantly higher than they were just five years ago.

Consider how the statewide median price point has changed:

• Fall of 2019: $210,000
• Fall of 2024: $302,000

And while mortgage rates have come down in recent months, they’re still more than double what they were three years ago.

This combination of higher prices and interest rates could present challenges for some Texas home buyers in 2025, particularly first time-buyers with limited budgets.

But there’s plenty of good news as well.

Overall, Texas has a much higher level of housing market supply when compared to the national average. Additionally, home prices in most Texas cities fall below the national median.

When compared to many other U.S. states, Texas could be considered a favorable real estate market for buyers. And this will continue in 2025 as well. 

Disclaimer: This report contains real estate market predictions, forecasts, and other forward-looking estimations. Such views are the equivalent of an educated guess. The Home Buying Institute makes no claims about future housing market trends.