Is The Texas Housing Market Hot, Cold, or in Freefall?

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Is The Texas Housing Market Hot, Cold, or in Freefall?

Before getting all fired up thinking this article is slanted in favor of its publisher, know this: it is not. The reality is the Texas housing market is transitioning from piping hot to cool. It is not in, nor is it expected to freefall. This means homeowners are, at least for several more months, still in control. Second, how many homebuyers would openly admit this? And how many investors publish articles that give away secrets like the 5 tactics homebuyers use to lower your price, how to stop real estate investors from spamming your phone, or 4 negotiation tips home investors don’t want you to know? You’ll be hard-pressed to find even 1 other.

Our purpose is to educate homeowners so that they can make the decision that most effectively addresses their needs. In pursuit of this purpose, this article is backed by empirical facts and data from respected, credible sources, of which, are cited herein.

What’s in it for you

  1. What caused the Texas housing market to get so hot
  2. Reasons home values in Texas could continue going up
  3. Signs that the Texas housing market is cooling

How Texas housing prices caught fire

The Texas housing market has been on fire! Since the pandemic began in March 2020, the rule has been double-digit appreciation, giddy sellers sifting through gaudy offers, and frantic buyers upping their bids tens-of-thousands above asking price. According to the National Association of Realtors (NAR), May 2022 housing prices fired up 14.8% when compared to May 2021 and have skyrocketed 45% since the pandemic began. It’s been a heated Texas housing market party, and it’s lasted far longer than anyone expected.

What happened to cause Texas home values to get so hot?

1. Federal policies in response to the pandemic
The Texas housing market began its climb when the US government enacted emergency policies aimed at fighting the economic impact of COVID – the eviction and foreclosure moratoriums, stimulus checks, student loan pauses, and historically low interest rates. In so doing, $6 trillion dollars ($6,000,000,000,000) in new money was printed. To give this perspective, during the 2008 financial crisis, the US government printed $800 billion ($0.8 trillion) to bail out the big banks.

Of the $6 trillion printed, $4 trillion was doled out in stimulus checks. The idea was to stimulate the economy through investments in the economy but because COVID remained rampant and kept people home, instead of increased consumer spending, much of that capital flowed into financial assets (e.g., stocks, crypto, real estate).
When the lockdown subsided, we went from economic standstill to spend mode, and with historically low interest rates levering up values even higher, Texans began spending with reckless abandon. As a result, demand increased, supply decreased, and the Texas housing market soared.

2. Texas’ favorable tax laws spurred a hot housing market
It’s no secret Texas has seen a massive influx in population. With enticing tax incentives and no state income tax, Fortune 500 companies like Hewlett Packard, Oracle, and Tesla have all moved their headquarters to the Lone Star State. Californians following jobs or looking for warm weather with a lower cost of living, have only added fire to Texas’ already hot housing market.

Why the Texas housing market is in trouble

The state of the Texas real estate market cannot be understood in a vacuum. One must instead consider its place within the overall economy which is made up of 6 interconnected dominoes and each domino causes the other to fall:

  1. Capital: when access to money becomes restrictive (e.g., high interest rates) or when money is tied up in illiquid assets (e.g., real estate), the 2nd domino begins to fall.
  2. Business Growth: when interest rates rise, businesses contract and the 3rd domino begins to fall.
  3. Jobs: when businesses contract, layoffs ensue, and unemployment rises.
  4. Stock Market: when unemployment rises (the unemployment rate is the primary indicator for an expanding or contracting economy) institutional investor selloffs ensue, and the 5th domino begins to fall.
  5. Consumer Sentiment: when the stock market falls, public fear sets in, consumer sell offs ensue, and the 6th domino begins to fall.
  6. Real Estate: when consumers are fearful, spending slows, demand lowers and supply increases, and the real estate market begins to shift to a buyers’ market. The shift takes time as sellers sober and let go of the drunken value of last year and what their neighbors sold for in a totally different Texas real estate market.

Currently we are teeter-tottering between dominoes 5 and 6. What could cause the 6th domino to fall? Consider these 6 troubling signs for the Texas housing market.

A cratering stock market spells trouble for Texas homeowners

Since the start of 2022, 14% of all global wealth has been destroyed. For context, during the 2008 financial crisis 19% of the world's wealth was destroyed.

Stock market darlings like Amazon are down 35%, Apple is down 25%, Facebook is down 50%, Google is down 23%, Netflix is down 70%, and Tesla is down 41%. The NASDAQ is down 30% but if you exclude its highest flyers, the median NASDAQ stock is down 70%. All the while, the S&P 500 is headed for its worst 6-months in 52 years.

What does this mean? According to Chief Investment Strategist of Bank America, Michael Hartnett, “in a quarter or two, we are going to be in a recession. Technically, we’re already in a recession but just don’t realize it yet and there are more shocks to the system to come.”

As the economy contracts and consumer spending slows, for those willing to pay attention, a floundering stock market signals big trouble for Texas housing markets.

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Rising interest rates means less home buying power for Texans

Mortgage rates have practically doubled in less than a year and are projected to soon surpass 6%; the highest level since 2009. The problem with rising interest rates is it reduces buying power which further restricts the size of the home buyer pool. Last year home buyers looking for a $625,000 home with a $500,000 mortgage at a 3% interest rate could expect a $2,100 monthly payment. The reality in 2022 is the mortgage for the same home jumps $900 to $3,000 per month at a 6% interest rate.

Practically speaking, doubling interest rates from 3% to 6% restricts the purchasing power of home buyers by 30%. Moreover, most people intuitively understand that paying a high interest rate on a home that's 30% more expensive than 1 year ago is probably not a good idea. The result? The Mortgage Bankers Association recently reported “a steep decrease in mortgage applications to buy and refinance which pushed the market index down to its lowest level in 22 years.”

Inflation is cutting into the purchasing power of Texas homebuyers

In June, inflation hit 40-year highs at 9.18% translating into consumers spending $510 ($6,120/year) more a month when compared to June of last year. With spending on everyday items requiring more of monthly budgets, consumers have less income for a mortgage payment.

Meanwhile, wages haven’t kept up with inflation, creating an affordability squeeze. According to NAR, wages have risen but only slightly to $212 per month meaning that Texas home buyers are coming up short by nearly $300 per month. This serves to further cut into the purchasing power of Texas homebuyers.


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Economic fundamentals do not support Texas’ current housing prices

Each month, analyst at Florida Atlantic University (FAU) evaluate how over- or under-priced homes are in America’s 100 largest housing markets. Their recent analysis, which uses March data, spells trouble for the Texas housing market.

According to FAU, Austin homeowners live in the 2nd most overvalued housing market in not just Texas, but the nation. Austin’s median home price is $589,600 which is 66% above the $354,600 price limit that FAU analyst say is supported by underlying economic fundamentals.  

But the Texas housing market has been on fire and Austin is not the only city where home prices are out of whack. Dallas is overvalued by 46% and not far behind are San Antonio and Houston at 30% and 28%, respectively.

That can’t be right, right? It’s somewhere in between. Moody’s Analytics, a proprietary data firm, maintains US housing market statistics and recently published a similar study. Moody’s found that Austin is overvalued by 41%, Dallas by 33%, San Antonio by 25%, and Houston by 28%.

Population growth and its impact on the Texas housing market

People create demand, and where there are fewer people, there is less demand. In 2021, the US population grew at a slower pace (0.1%) than in any other year since the US became a country. Even though 0.1% of today’s population represents almost 1 million people, 2021 still represented the lowest numeric population growth since 1900. As population growth and birth rates continue to decline combined with an aging population, the Texas housing market is destined for a correction.

Texas’ housing inventory is on the rise

Most people sell one home to buy another, so sales derived from existing homeowners are not used in determining housing supply. Instead, supply is determined by the number of housing starts. When the pandemic began it stagnated the US and Texas housing markets. Homes already in the process of being built were halted and new home builds came to a standstill for more than a year. Once the lockdown lifted, homebuilders went full steam ahead and homebuyers, fat in fresh stimulus cash plus months of savings from having to stay home, invested much of their liquidity in real estate.

Fast forward 18 months and home builders are bringing 2.5 million new homes onto the housing market against a flat population. Those who invested in real estate at the start of the pandemic used up their disposable cash and the result is you have fewer home buyers yet more houses coming onto the market. Go check out the map of active listings at and what you’ll find, in San Antonio for instance, is literally hundreds of new listings. You’ll also find that approximately 20% of these listings have lowered their asking price.

A recent NAR report confirms these findings. In May home sales fell for the fourth straight month and are down 8.6% from a year ago. Just because you ignore facts doesn’t make them cease to exist - it’s obvious - Texas’ housing inventory is on the rise, and it spells trouble for homeowners looking to sell on the MLS.  

Why Texas housing markets could stay hot

The nightmarish memories of the 2008 subprime mortgage crisis loom large with the thought of another real estate market bust. Doug Duncan, Chief Economist at mortgage behemoth Fannie Mae, acknowledges concerns about the stability of the housing market when he said, “in the past, big run-ups in home prices have been a recipe for trouble. Our view is that housing prices are somewhere in the 15% range above what the long-term fundamentals suggest.”

However, Lawrence Yun, NAR’s Chief Economist, says that housing prices could continue to rise throughout the summer due to an imbalance between home supply and home demand. Although supply is increasing as shown above, the housing market in Texas does not appear destined for another crash, just a noticeable correction.

FAQ’s – Is the Texas housing market hot, cool, or in freefall?

1. I recently bought my house and don’t have much equity; can I still sell?
Yes, just like the big banks you can sell your mortgage! Even with no equity, Good Vibes Homebuyers can still pay you up to $10,000!

2. How much house can I afford?
It depends on how much money you earn versus how much you pay out in debts and expenses each month. Many financial advisors recommend the 28/36 percent rule of home affordability, which says that you should spend no more than 28 percent of your gross monthly income on housing expenses, and no more than 36 percent on total debt. Bankrate’s home affordability calculator can help you crunch the numbers.

3.  What should I do if I’m looking to buy a house right now?
Be patient. The market will only become more favorable for buyers as time passes. Start getting your finances in order by paying off high-interest debt. This will allow you to qualify for the maximum amount of financing when you find the right house. If you must buy right now, then be sure to read our blog, 9 Dumb Home Buying Mistakes People Make, before buying anything.

4. What should I do if I need to sell my house right now?
Either sell right now or expect to wait for at least 5 years. If you decide to sell right now, look at other similar houses that are for sale in your area and price your house for 10% less. This will cause the few remaining buyers to make offers and hopefully create a multiple offer situation. If you decide that now is not the time to sell, you can either remain in your house, or if the rental value is high enough, you can move and rent it.

Sell your house while the market is still hot!

Time is quickly running out on the Texas housing market staying hot so now is the time to act. With Good Vibes Homebuyers, we focus on big volume, not big profit, so we're often able to pay your asking price and we provide options that even allow you to get more than your asking price. It’s time for you to thrive with Good Vibes Homebuyers so contact us today!


You might also like

  1. 3 tips for what is a great offer when selling your home
  2. What it means to sell your home subject to its existing mortgage
  3. How to buy more home for less money


  1. Bankrate: Is the Housing Market About to Crash? Here’s What the Experts Say
  2. Census Bureau: Historically Small Population Gains Since Covid-19
  3. CNBC: Stocks sharply trim losses, but the S&P 500 is on track for worst first half in decades
  4. Darren Hardy: Darren’s Economic Outlook
  5. Forbes: Housing Market Predictions 2022: Will Prices Drop In The Third Quarter?
  6. Forbes: The Housing Market Just Hit the Brakes. What Happens Now?
  7. Fortune: The Last Housing Bubble Missed Texas. Now the Lone Star State is Home to the 2nd Most Overvalued Housing Market
  8. Fortune: We’re in a Historically Overvalued Housing Market
  9. NAR: Existing-Home Sales Fell 3.4% in May
  10. NAR: Rising Inflation Means Homebuyers Will Be Looking for Homes That Are $40,000 Cheaper
  11. Seeking Alpha: A Clear Warning Signal for the Housing Market

Simple. Certain. Sold.

Free closing costs. Free Local Move. Zero fees. Sell in 5 days. Sell and stay for 180 days. No equity? Still get $10,000 cash!

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