Texas residents looking to buy a home may finally get some relief, if current pricing trends are to continue, that is. Following a significant surge, real estate prices have begun a sharp tack downward toward pre-pandemic levels in nearly every metro in the state. For those in the real estate business, the pricing correction may also allow more buyers to enter the market than the previous year did.
As data from real estate aggregator Redfin shows, the housing price surge experienced by Texans in the early stages of the pandemic was one of the sharpest in the nation. According to Redfin, median home prices statewide rose from $243,000 in January of 2022 to $378,000 at the market's peak in May of 2022. While prices corrected modestly after that, the drop back down increased of late.
Particularly hard-hit were the following metro areas - many of them quite popular, particularly at the onset of the pandemic. As workers began to call their spare bedrooms an "office," many relocated to cities they wanted to live in - rather than had to live in. The ramifications on the housing market were immediate. When combined with lowered interest rates at the start of the pandemic, the housing market saw unprecedented demand.
With those circumstances removed, Texas prices have started to drift ever-lower, particularly in these areas:
Authors note - all real estate data, including median sales prices, used for this article originates from Redfin's data center. Should you wish to take a look at your individual city, county, or region, you can get to the main page here and then select the appropriate dropdown menus.
1. Austin
We're not sure the old adage "what goes up must eventually come down" is always correct, but Austin makes a good case for it. By far one of the state's most popular cities - particularly for out-of-state transplants - the area saw one of the most meteoric rises in housing prices out of the entire state. Unfortunately, its drop has been similarly sharp.
Only a few years ago, at the beginning of 2020, median home prices in the area were $309,000. By April 2022, that had nearly doubled to $555,000. During that time period, the average Austin area home sold within 25 days of its initial listing - and more than two-thirds of them sold above the asking price, at that.
But times have changed. While the city is still growing in population and will almost certainly continue to do so into the near future, the housing market has cooled significantly. The average home is now taking 80 days to sell - more than three times as long - and is doing so at a significantly lower median value of $451,000. While this is still a hefty price, particularly compared to pre-pandemic levels, those who bought at the peak of the market will have already lost $100,000 or more in the value of their home.
2. Midland
Midland might not have been anyone's pick to make this list, but the city has seen a significant drop in home values for the last two months, earning it a spot on our list. In fact, Midland's median home sales price dropped 18% just since October of 2022.
Midland's market peak came a little later than most, in August of 2022. Back at that time, more than a third of the area's homes were sold within two weeks of their listing. Now it's only 17% - still a fairly high number, but less than half of the peak.
Off all the areas on our list, Midland has perhaps the highest potential for prices to turn around and start inching up again. Think tanks and analysts alike have projected Midland (the city and the county) to be among the fastest-growing in the nation in the coming years and decades. If those predictions turn out to be a reality, the demand in the area alone should sustain housing prices. For now, though, Midland is cheaper than Texas as a whole at $270,000 for the median home.
3. Dallas
Wrapping up our list is another Texas city with a national profile. While prices in Dallas never hit the stratospheric levels that Austin did, the city did still see a steep incline between 2020 and 2022 when prices surged from $282,000 to $463,000 for the median home in the area.
While the supply of homes on the market bottomed out in February of 2022, prices didn't hit their peak until three months later in May. Since that time, the median sales price and price-per-square-foot both decreased about 15%, with median homes now just under $400,000.
Just as Midland is projected to be, Dallas already is one of the fastest-growing cities in the United States. Unlike Midland, however, the price point in the area is significantly steeper, potentially pricing out some young professionals or families in the market for a starter home. With companies all over the nation relocating their headquarters to the area, however, demand is not likely to completely dry up any time soon.
Most of Texas has seen real estate prices drift back to lower levels amidst rising interest rates and increasing supply levels. That said, these three metros were among the worst-faring in the recent market. What's bad news for existing homeowners may be welcome news for prospective buyers, however, as these cities now offer entry points into homeownership that are as much as a third cheaper than they were less than a year ago.
Time will tell if the market continues to cool off or if interest rates continue to rise as the Fed tries to fight inflation. For now, though, one thing is for certain - the frenzied peak of the 2022 housing market is a thing of the past.
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