How Texas Got Here: Four Years of Boom, Correction, and Reset

The Texas housing market of 2020–2022 was defined by a collision of forces that may not recur in any of our lifetimes: pandemic-driven migration, historically low mortgage rates (sub-3 percent at the trough), and a chronic shortage of available homes. The four major metros — Austin, Dallas-Fort Worth, Houston, and San Antonio — absorbed hundreds of thousands of in-migrants from California, the Northeast, and the Midwest who were drawn by Texas’s relative affordability, no state income tax, and an expanding job market in tech, energy, and finance.

By 2022, that flood of demand ran headlong into a wall of monetary tightening. The Federal Reserve raised its benchmark rate eleven times between March 2022 and July 2023, pushing 30-year mortgage rates from the low 3s to above 7 percent. Sales volume collapsed. The investors who had been bidding up prices went to the sidelines. And a market that had sprinted for three years abruptly stopped.

What followed wasn’t the nationwide crash that some predicted. Instead, the national market largely stagnated under the “lock-in effect” — owners with sub-4 percent mortgages refused to list, keeping supply tight and prices artificially elevated in most of the country. Texas, however, had a different problem: its building industry had responded to the pandemic boom by permitting over 200,000 new housing units in recent annual counts, roughly double most competing states. That pipeline kept delivering inventory even as buyer demand cooled. The result was a slow but steady repricing that is still working its way through the system in 2026. For more on how this national dynamic plays out differently across U.S. regions, our analysis of the two-speed housing market provides useful context.

Metro-by-Metro: Austin, DFW, Houston, and San Antonio in 2026

Statewide data tells the directional story, but the four major Texas metros are experiencing meaningfully different conditions. Austin has borne the sharpest correction; DFW has seen the most resilience; Houston and San Antonio fall somewhere in between, each with its own supply dynamic. The table below summarizes the key March 2026 metrics for each market, all sourced from TRERC’s analysis of Data Relevance Project and Texas REALTORS® data.

Austin: The Deepest Correction, and a Genuine Opportunity

Austin has absorbed the largest price correction of any major Texas metro. Prices are down approximately 3 percent year over year through March 2026 — a continuation of a decline that has been running since 2022 — and the median seller price cut of $25,000 represents 5.4 percent off the original list price, the highest discount rate in the state. New-listings activity is running 1.7 percent ahead of a year ago, adding to an already well-supplied market.

The mechanism is straightforward: Austin attracted the most speculative investment during the 2020–2022 boom, with prices in some neighborhoods doubling in under three years. When rates rose, that speculative premium evaporated first. Today, the Texas market guide at PreferredProperties.com tracks the Austin metro’s ongoing repricing alongside statewide conditions. For buyers with a long time horizon and stable income, the combination of meaningfully lower prices and motivated sellers makes Austin worth serious consideration — particularly in submarkets like Round Rock, Cedar Park, and Georgetown, which retain strong school districts and job access but saw some of the steepest pandemic runup.

Dallas–Fort Worth: Texas’s Most Resilient Market

DFW has held up better than any other major Texas metro, with prices down just 0.8 percent year over year — essentially flat. Active inventory is up 3.4 percent, the smallest inventory gain of any major Texas metro, and median price cuts average $15,000. The relative resilience reflects DFW’s more diversified economic base: finance, technology, logistics, healthcare, and defense all maintain large employment footprints in the metro, spreading demand across a broader income range than tech-dependent Austin.

Dallas-Fort Worth also leads the nation in new-home sales volume, which both competes with and supports the broader market. The weight of builder activity keeps absolute prices from rising sharply, but the depth of underlying demand prevents the kind of correction Austin has experienced. First-quarter 2026 sales in DFW were down 1.9 percent year over year — a modest dip that reflects cautious consumer sentiment more than structural weakness.

Houston: Energy, Inventory, and a Supply Surge

Houston’s inventory jumped 9.8 percent year over year through March 2026, the second-largest increase among the major metros. That supply surge is partly seasonal — Houston’s spring market tends to front-load listings — but also reflects softening demand as energy-sector employment, while still healthy, has plateaued from its 2024 highs. Prices are off 1.6 percent year over year, and median price cuts of $15,500 are close to the statewide average. First-quarter sales declined 1.2 percent year over year, continuing a mild sales slowdown that began in late 2025.

Houston’s particular geography matters here. The metro’s lack of zoning regulation means builders can respond quickly to demand signals, which consistently keeps supply from getting too tight. That same dynamic, however, also means prices rarely run far above replacement cost for long, capping both the upside and the downside of any price swing.

San Antonio: The Biggest Supply Surge of Any Major Texas Metro

San Antonio saw new-listings volume jump 14.5 percent above year-ago levels through March 2026 — described by TRERC as the strongest seasonal momentum the market has seen since 2021. Active inventory is up 10 percent year over year, and prices are off 1.7 percent. Median seller price cuts of $18,000 represent 5.2 percent off the initial list price, the second-largest discount rate after Austin.

San Antonio’s market tends to be more price-sensitive than Austin or DFW because its buyer pool skews toward lower-to-middle income households (median household income runs about 15 percent below the DFW metro). That sensitivity means sellers there may need to be more aggressive on price adjustments when inventory is abundant, as it is today. First-quarter sales declined 1.4 percent year over year, consistent with the broader state slowdown.

The New Construction Factor: Builders Are Competing on Price Like Never Before

One of the most consequential developments in the Texas housing market is the convergence of new construction and resale pricing. Before the pandemia, new homes in Texas typically carried a price premium of roughly $75,000 to $100,000 above comparable existing homes — equivalent to a 40–60 percent markup. That premium compensated buyers for the inconvenience of construction timelines, finishes choices, and first-year maintenance costs.

That premium has collapsed. By March 2026, the median sales price for new construction statewide was $341,500, compared with $326,200 for existing homes — a gap of just $15,500, according to TRERC. A year ago, that gap was $19,900. The dramatic narrowing reflects a structural shift in builder strategy: since summer 2022, production builders have been systematically scaling back square footage and finishes to hit lower absolute price points. D.R. Horton, Lennar, and KB Home — all of which have major presences in the Texas market — have pivoted toward smaller starter homes and entry-level townhomes in outer-ring suburbs, where land costs are lower.

Builder Incentives Are Real — and Worth Negotiating

Beyond the price-point strategy, builders are deploying a second lever: incentive packages. In DFW, Houston, Austin, and San Antonio, builder packages in early 2026 routinely bundle rate buydowns, closing cost credits, and design-center upgrades worth $15,000 to $40,000 combined. Some national builders are offering forward-commitment rates in the 5.49 percent range through their captive mortgage companies, using a 2-1 temporary buydown that reduces the effective rate in the first year by 2 percentage points, then 1 percentage point in the second year. On a $350,000 home, a well-structured buydown can save $400 or more per month in year one.

There is an important caveat: captive builder mortgage rates are not always the best available. Buyers who finance through a builder’s preferred lender may be accepting a slightly higher base rate in exchange for the incentive credit. The math usually favors taking the incentive only if the buyer intends to hold the mortgage for at least three to five years, or if the buydown period aligns with an anticipated refinance window. Our free mortgage calculators can help you model the true long-term cost of different buydown structures against a standard market-rate loan.

For buyers navigating both the resale and new-construction markets simultaneously, the narrowing price gap means that new homes are now a genuine alternative rather than a premium trade-off. This competition also exerts downward pressure on existing-home sellers, who can no longer assume a newly built home will be priced well out of their buyer’s reach.

Population Growth: Still the Foundation, But the Pace Has Slowed

The long-run bull case for Texas real estate has always rested on demographic fundamentals, and those fundamentals have not reversed — but they have moderated. According to U.S. Census Bureau data released in January 2026, Texas added 391,243 residents in 2025, more than any other state, bringing its population to approximately 31.7 million. The growth rate of 1.2 percent, however, was the slowest for the state since 2021 and ranked Texas fourth nationally for pace of growth, behind South Carolina, Idaho, and North Carolina.

The deceleration is driven primarily by a collapse in net domestic migration. In 2022, Texas gained 222,154 residents from other U.S. states. In 2025, that figure fell to just 67,299 — a 70 percent decline in three years. Researchers at the Texas Demographic Center attribute the slowdown to two overlapping forces: a “dry well” effect (the cohort of Americans who most wanted to move to Texas already has), and broader economic uncertainty that is prompting household formation and relocation decisions to stall nationwide.

International migration also contracted sharply: net immigration to Texas dropped approximately 48 percent in 2025, mirroring a nationwide trend. TRERC’s “Whoa There! Is the Texas Growth Miracle Fading?” analysis notes that while population growth remains positive, the housing demand implications of slower in-migration are already visible in the inventory data — fewer new households forming means fewer new buyers.

The practical implication for the housing market: Texas is unlikely to experience the demand shocks of 2020–2022 again in the near term, but neither is it facing the kind of population-driven price collapse that some Sun Belt markets that are actually losing residents might experience. The demand floor is real; it is simply lower than it was. For a broader view of how national market trends are intersecting with Texas-specific dynamics, our Market Insights hub tracks the data quarterly.

Spring 2026 Headwinds: Rates, Inflation, and a Cautious Buyer Pool

March 2026’s sales improvement — up 6.7 percent year over year statewide, with Austin up 8.5 percent and San Antonio up 10.5 percent — was real, but TRERC analysts caution against reading it as a trend reversal. The March gains largely reflected the lagged effect of mortgage rate declines that had been trending downward since the middle of 2025. By late winter, those favorable rate conditions were reversing.

As of June 2026, the average 30-year fixed mortgage rate in Texas is running in the 6.75 to 6.90 percent range, according to Experian and Freddie Mac primary mortgage market survey data. That is meaningfully higher than the 6.3–6.5 percent range that prevailed in early 2026 and helped produce the March sales bounce. The reversal has already shown up in April’s pending home-sales index, which TRERC describes as “slower buyer-contract-pending activity than typically recorded for the month of April.”

On top of the rate headwind, geopolitical instability and rising energy prices (which ripple through Texas both as a cost-push inflation factor and as a variable affecting Houston’s employment outlook) have introduced fresh uncertainty into household financial planning. When consumers are uncertain about the economy, they defer major purchases — and few purchases are more major than a home. For buyers weighing the decision to act now or wait, our detailed look at why mortgage rates remain elevated and how to lower yours is a useful analytical framework.

The Buyer’s Playbook for Texas in 2026

The combination of elevated inventory, rising days on market, widespread price cuts, and motivated sellers creates a negotiating environment that buyers in Texas have not seen since the years just before the pandemic. Understanding how to use it is the difference between overpaying and genuinely capturing the market’s current advantage.

• Get fully underwritten, not just pre-qualified. In a market where sellers have options and timelines matter, a fully underwritten pre-approval from your lender is meaningfully stronger than a pre-qualification letter. It signals you’ve cleared income, asset, and credit review — reducing the seller’s uncertainty about whether the deal will close.
• Anchor to sold comps, not list price. With homes averaging 82 days on market and median seller price cuts of $14,900 statewide (up to $25,000 in Austin), list prices are often aspirational rather than predictive. Research closed sales within the past 60 days within a half-mile to establish a credible value range before making any offer.
• Request seller concessions for rate buydown or closing costs. Rather than only negotiating on purchase price (which affects your basis and future capital gains calculations), consider requesting seller-paid closing costs or a 2-1 buydown contribution. A $15,000 seller concession applied to a rate buydown can reduce your effective rate by nearly two points in year one, materially improving monthly cash flow while you wait for rates to normalize.
• Compare new construction seriously. With the new-versus-resale price gap at an all-time low of $15,500 statewide, a new home with builder incentives may pencil out better than a resale requiring immediate repairs. Factor in energy efficiency, warranty coverage, and the builder incentive package when running the numbers.
• Don’t skip the inspection. Homes sitting 82 days are sitting for a reason. Some are overpriced; others have deferred maintenance or condition issues that a pre-listing seller inspection hasn’t surfaced. A thorough buyer’s inspection is non-negotiable in this market.

For a deeper tactical breakdown of how to structure offers, handle counteroffers, and use contingencies strategically, our 2026 buyer negotiation playbook walks through the mechanics in detail. A broader step-by-step guide to the entire homebuying process is available via our Buyer Tips hub.

The Seller’s Playbook for Texas in 2026

Selling in a buyer’s market requires a different mindset than the 2021 playbook, where overpricing was a viable opening gambit because desperate buyers would inevitably close the gap. In 2026, an overpriced listing in any major Texas metro generates a predictable outcome: it sits, it accumulates days-on-market stigma, and it eventually sells at a deeper discount than it would have at a properly calibrated initial price.

The TRERC data is unambiguous: one in four active listings received a pending offer during March. The other three did not. The dividing line between listings that sell and listings that stagnate is almost always price — not condition, not marketing, not timing. Homes priced at or slightly below comparable recent sales generate buyer urgency even in a well-supplied market; homes priced for the peak of 2022 generate nothing but carrying costs.

• Price to the current market, not the market you remember. Pull sold comps from the last 45 days, not the last six months. Markets in transition can reprice by 1–2 percent per quarter; a six-month-old comp may overstate value by 5 percent or more in a declining metro like Austin.
• Front-load your negotiating room into the list price. Sellers who price correctly up front consistently net more than those who price high, sit, then cut. A $15,000 upfront price adjustment costs less in net proceeds than a $20,000 price cut after 60 days on market, because the longer a home sits, the more buyers discount it.
• Budget for seller concessions. Buyers in this market are requesting 3–5 percent in concessions as a matter of course. Rather than viewing this as a surprise, build it into your net proceeds calculation upfront. A $330,000 list price with an anticipated $12,000 concession nets $318,000; pricing at $320,000 to “net more” often results in sitting longer and netting less.
• Compete with new construction on condition. With the new-construction price premium at an all-time low, buyers comparing your resale to a nearby new home will be assessing condition closely. Pre-listing inspection, fresh paint, and professional cleaning are not luxuries in this environment — they are competitive requirements.

Our detailed guide to maximizing your home sale proceeds in 2026 covers pricing strategy, concessions math, and the specific staging and prep investments that deliver the best return on seller dollars in the current market. For owners still deciding whether to sell now or wait, the decision rests heavily on your carrying costs, your next housing situation, and whether prices in your specific metro are more likely to continue declining or stabilize — which varies considerably across the four major metros above.

Is Texas Still Affordable? The Honest Answer in 2026

Despite ten consecutive months of price declines, the Texas housing market is not cheap by historical standards. The statewide median of $332,000, financed at 6.80 percent with 10 percent down on a 30-year fixed mortgage, produces a principal-and-interest payment of approximately $1,960 per month before property taxes, insurance, and any HOA fees. Property taxes in Texas are among the highest in the nation — effective rates of 1.5 to 2.5 percent are common in major metro counties — so a $332,000 home may carry an additional $400 to $700 per month in taxes alone. Total housing costs of $2,500 to $2,700 per month on a median-priced home represent roughly 30–35 percent of pre-tax income for a household earning $85,000 to $90,000 per year, which is roughly where Texas median household incomes cluster.

That’s at the edge of affordability by conventional standards — not a crisis, but not comfortable. The gap between income growth and housing cost growth is why the Texas housing affordability index, tracked quarterly by TRERC, has been below its long-run average for several consecutive years.

The counterpoint is that Texas’s lack of a state income tax meaningfully improves purchasing power relative to states like California or New York, where a similar gross income leaves considerably less take-home pay after state taxes. A $90,000 earner in Texas keeps approximately $6,300 more annually than a comparable earner in California, which translates to real buying power. That structural advantage is part of why Texas demand, while slower than the pandemic peak, has not collapsed.

For buyers trying to determine what they can genuinely afford in their specific metro, rather than relying on rule-of-thumb percentages, our affordability and mortgage payment calculators let you model total housing costs at any combination of price, down payment, rate, and local tax rate.

The Bottom Line: A Decision Framework for Every Texas Market Participant

The Texas housing market of mid-2026 is neither the panic-buying fever of 2021 nor a market in freefall. It is a well-supplied, buyer-advantaged market where the rules have genuinely changed from the post-pandemic era — and where the outcomes for buyers, sellers, and owners vary significantly by metro, price point, and individual financial situation.

• Buyers who are financially ready should act deliberately, not urgently. The inventory is there, the leverage is real, and the competition is low. But “ready” means fully pre-approved, with a clear understanding of total monthly costs including taxes and insurance, a credible down payment, and a realistic hold horizon. Buyers stretching to afford a home at today’s rates with a 3–5 year horizon are making a different bet than buyers with a 10–15 year horizon.
• Sellers must accept the market as it is, not as it was. DFW is the most forgiving market; Austin requires the most aggressive repricing. In all four metros, homes priced at current comps move; homes priced at 2022 memory sit. The sellers doing best right now are those who treat the first week on market as a genuine competitive test and adjust quickly if it fails.
• Owners not planning to transact should focus on equity and total cost of ownership. Texas home equity, while not growing as fast as it was, has not been structurally impaired. Long-term owners who purchased before 2020 have substantial equity cushions. Owners who purchased at or near the 2022 peak in Austin may be close to, or below, purchase price and should resist the temptation to view their home as a liquid investment with a specific exit timeline.
• The second half of 2026 is the key variable. TRERC’s May 2026 report notes that the spring season is entering with fresh headwinds — higher energy prices, rising mortgage rates, and geopolitical uncertainty. Whether those headwinds persist into autumn will determine whether the March sales recovery was the beginning of stabilization or a temporary interruption in a longer softening cycle. Watch the monthly pending home-sales index and new-listings data as the most leading indicators available.