Texas Housing Market Dims Post-Pandemic Surge

The allure of Texas, once a flourishing hotbed in the pandemic-driven real estate market, has started to wane among potential buyers due to various factors. A sharp shift, catalyzed by surging mortgage rates and escalating home insurance premiums, has cultivated a landscape appealing only to the most dedicated buyers.

The statistics speak volumes: Texas witnessed a substantial 14.2% year-over-year drop in sales volume by September, according to the Texas A&M University Texas Real Estate Research Center’s latest analysis. Insights from the Federal Reserve’s Beige Book, drawing from the Dallas district, revealed declines in home sales and buyer traffic accompanied by an uptick in cancellations, largely attributed to increased mortgage rates.

Amidst this, prices have continued their upward trajectory, rising by 1.8% month-over-month, equating to almost a $6,000 increase, as found in the Texas A&M report. The majority—56%—of home sales fell within the $200,000 to $400,000 range. Despite this price surge, the Texas Repeat Sales Home Price Index peaked in July but showed a slight decline in September, stabilizing the growth rates comparable to the previous year’s peaks.

However, it’s not solely price trends that are altering buyer decisions. The surge in home insurance rates is a substantial factor reshaping the market. Insurance companies in Texas, Oregon, Utah, Arizona, Illinois, and North Carolina have increased approved home insurance rates by 20% to 30% since January 2022 to offset weather-related losses.

This shift has prompted a slowdown, allowing some buyers room for negotiation. Nonetheless, there’s a glimmer of potential amidst this slowdown, with pending home sales soaring by 9.7% in Dallas in October compared to September, as reported by Redfin. However, experts remain cautious, acknowledging this as a potential start of a trend but emphasizing that it’s too early to predict an enduring shift in sales volume.