Is Buying in Texas a Good or Bad Idea?

Texas homebuyers have been facing an uphill battle with frozen interest rates and stagnating inflation since their rise and hover in the start of 2022 — this came as a result of the low rates and huge demand we saw from the beginning of 2020. Builders across the state have been doing all they can to keep up with the demand that some thought would never go away, but now it seems that they have misread their crystal ball.

High Interest Rates: It was the end of the first quarter in 2020 when interest rates began to plummet and with the low cost of loaned capital, buyers from all walks of life decided that it was time to “buy up” while prices and interest rates were so low. With this sort of menatlity, like the boom of GameStop, everyone dumped their inexpensive new money (interest rates were as low as 2.65% in Jan. ‘21 in some instances) into real estate and it didn’t take long for real estate prices to start to soar far beyond anything Texas has seen before. During this time it was common for an offer $100k over asking price to be rejected because Sellers had another offer who was willing to pay even more for their property. This went on strong for nearly two years before interest rates began to rise, and then the late adopters and laggards joined the game in an attempt to have their piece of what seemed like a once in a lifetime opportunity. With all of the new money circulating in the country and home prices and the cost of every other good and service began to rise, which put more pressure on the powers that be to increase interest rates to slow inflation and allow the economy to level out. Since March of 2022 rates have been incrementally going up and, as of today are hovering around 6.75%, nearly triple what they were in the beginning of January 2021. As a result of all the buying that was going on in the country, Texas’ already low supply of homes dwindled even further and has since began to spring back.

Growing Supply: In order to quell the demands of the homebuyers during 2020-2022, builders began creating new developments all over Texas and could hardly keep up with the domestic and foreign demands in the industry. Besides the major uptick in interest in real estate from locals, Texas was also becoming one of the new tech hubs of the country with thousands of people relocating to the state with their jobs and some who were recently unfettered to the life of remote work moved to take advantage of the low cost of living in Texas, respective to their own state of origin. But since this major influx of homeowners has begun to slow, builders have found themselves with a very negative outlook, and are willing to do nearly anything to get the homes that they have built off their books which are manifesting in major price cuts and offering low (4.99%) and buy-down interest rates. To give a better sense of what the market looked like, in 2020 Houston had a housing inventory of about 2 months, which is one third of what was considered a healthy inventory given the demand at that time, but as of June 2025 Houston’s inventory was at a 5.4 months and climbing with a diminishing demand. While it is a glimmer of hope for homebuyers to think that the rising inventory and price cuts are a good thing, as it offers buyers more options, it is also a bit troublesome as the data shows that while more homes are being listed, they are taking longer to close, which could mean a general slowdown of all real estate sales and potentially a loss of value in homes that were bought at the height of the buying frenzy of the 2020-2022 boom.

Prediction: Multiple areas in the state are experiencing a dip in sales price and this is largely in part to the high supply, high interest rates, and low demand caused by an exodus of locals to more affordable neighboring states like Oklahoma and Arkansas. Over the past 2 and a half years Austin has seen a -20.9% price decrease, -6.2% in San Antonio, -3% in Dallas, and less than -1% in Houston. That being said, there are predictions that by June 2026 Austin will see a price decrease of 7% and Dallas is predicted to decrease by 10%-12%. While it looks like Houston’s home prices have remained pretty stable, it seems that they will be the next in line to see some price corrections. This means that over the next 7 years, homebuyers can expect to see high interest rates slowly inching their way down along with the value of real estate in Texas, in order to balance out a diluted and inflated market.

Conclusion: While it is clear that Texas is no longer the low-cost state that it once was, prior to 2020, the good news for homebuyers in Houston is that builders are willing to make concessions and offer unconventional loans in order to offload their inventory and home prices will correct themselves and allow for more affordable real estate with lower interest rates within the next few years.

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