Texas Housing Insight: Sales And Prices Take A Plunge

Austin and Dallas show gains while Houston weakens and San Antonio plummets

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High mortgage rates continue to put downward pressure on the housing market, with Texas home sales decreasing 5.9% year-over-year (YOY) in October. The average price fell alongside sales, with homes costing around $6,000 less than in September. Demand for new construction increased despite the high entry barrier into the housing market. Homes continue to sit on the market longer, increasing by a week since the start of the year.

Housing Demand Remains Weak

High mortgage rates continue to decrease demand for homebuyers, leading to Texas' total home sales falling 3.7% to 26,164 sales in October. The “Big Four" metros were split, with Austin and Dallas experiencing gains while Houston and San Antonio fell significantly. Austin had the highest monthly elevation with a 2.4% growth rate, while San Antonio plummeted by 6.1%. The gap between Dallas and Houston grew as they moved in opposite directions. High mortgage rates continue to increase the entry barrier for buyers, leaving only the most committed buyers in the market.

The state's average days on market (DOM) enters its sixth month of decreases, falling from 59 days in February to 52 days in October, indicating a shorter listing period. Among the major metros, Houston (44 days) posted the only monthly decrease, while San Antonio (70 days) posted the largest gain. Dallas (44 days) and Austin (68 days) remain unchanged from the previous month.

Housing supplies are stocking up as active listings marked their seventh straight month of increases, climbing 4.1% to 98,875 listings. All four major metros posted monthly gains with Houston (8.5%) adding 1,867 listings, while Austin (0.9%) had a moderate gain of 84 listings. The constant increases since the start of 2023 have put the state's active listings number at October 2019 levels.

The state's new listings fell 1.45% to 42,100 in October. San Antonio contributed heavily to this decline, falling over 17% (790 homes). Amid the rise in active listings, the months of inventory (MOI) grew to 3.8 months, with all four major metros posting marginal gains.

High Mortgage Rates Continue to Impair Affordability

The Fed's effort to curb inflation has led to a substantial rise in both treasury and mortgage rates. The 10-year U.S. Treasury Bond yield grew for the sixth consecutive month reaching 4.8%. Likewise, the Federal Home Loan Mortgage Corporation's 30-year fixed rate increased to 7.62%, up 42 basis points. The inflated mortgage rate is expected to further raise the cost of homeownership, decreasing mortgage applications.

High mortgage rates continue to increase the entry barrier for buyers, leaving only the most committed in the market.

Single-Family Permit Levels Rebound

Texas' single-family construction permits rose 1.1% month over month (MOM) to 12,619 issuances. All four major metros reported growing demand for permits except for Houston (4,007 units), falling 4.6%. Among the other three metros, both San Antonio (967 units) and Dallas (3,731 units) saw double-digit monthly percent gains at 31 and 24%, respectively. Austin rebounded from last month's fall, climbing 8.7% to 1,643 units.

Construction starts grew alongside construction permits according to data from Dodge Construction Network. Single-family construction starts increased 1.2% MOM to 11,556 units. Both Dallas and Houston led with over 3,250 houses breaking ground, surpassing the combined total of other metros outside the Big Four. Home project starts in Austin (1,605 starts) and San Antonio (694 starts) surpassed the typical 2:1 ratio.

The state's year-to-date total single-family starts value climbed to $25.4 billion, up from $22.8 billion in September. Starts values continued the previous month's trend of mirroring the values observed in 2019. Houston and Dallas remain the largest contributors, accounting for more than half of the state's construction activity values. Dallas' market share rose to 30.2%, with Houston trailing at 29.7%.

Median Home Price Falls for First Time Since February

After last month's spike in median home prices, October erased that increase with the housing market easing as the median home price fell 1.9% MOM, falling by over $6,000 from last month. Housing prices remained elevated, but this month they declined as all of the Big Four metros reported monthly decreases with Austin experiencing the greatest decrease at 3%. Dallas and Houston declined by over 1% while San Antonio declined the least at 0.7% (Table 2).

Due to the price rise, half of homes are now priced at $200,000-$300,000 or $300,000-$400,000, accounting for 26% and 24% of total home sales, respectively.

The Texas Repeat Sales Home Price Index (Dec 2004=100) moderated at a 0.1% MOM loss but was up 1.5% from the previous year. Austin had the lowest annual appreciation with a 5.7% YOY decrease while Houston showed the highest annual appreciation at 2.5%.