Texas Real Estate Market Report: Analyzing Trends & Predictions for 2023

With the Texas real estate market constantly changing and evolving, it can be difficult to stay informed on current trends or predict what will happen in 2023. But as potential buyers and sellers begin mapping out their plans for the future, understanding how the state’s real estate market is shifting is essential. 

In this blog post, we’ll take a closer look at Texas’ real estate market activity — exploring recent developments, analyzing short-term trends, and making predictions about what we might expect.

Whether you’re already established in Texas or just considering entering the Lone Star State’s housing market soon, these insights could prove invaluable when making crucial decisions about your investments!

A Look Back at the Past 6-9 Months in Texas Real Estate

Before jumping into the data, I want to discuss what’s been happening over the last 6-9 months in the Texas Real Estate Market. 

In June 2022, what was expected to be a thriving summer sales season quickly took an unexpected turn. Customers were met with sticker shock as interest rates skyrocketed from the previous year’s rate into the 6-7% range – significantly dampening demand in the market.

This change in rates caused homes to immediately become significantly more expensive for buyers. This left sellers either frantically trying to unload their properties or riding out the storm and hoping for values not too badly impacted by this spike in costs. 

That trend continued throughout 2022 and into January of 2023. The winter months saw year over year declines in closed by around 40-50% depending on the month and the market. Those declines are unprecedented and we quickly saw the market shift from a seller’s market to a buyer’s market almost overnight.

Sellers paying closing costs to help buyers “buy down” their interest rate became almost a prerequisite for every offer and sellers were gladly paying it in order to get the deal done.

Real Estate Market Trends in the Four Major Markets of Texas

Texas’s four major markets are all performing in a pretty similar manner. Austin leads the charge with the most change year-over-year. This comes largely as a result of a steeper run up in prices in 2021.

Austin Real Estate Market Breakdown

2022 Recap

Total Transactions were down 19.1% for the year for a total of 33,647 sales (down from 41,077).

Months supply of inventory climbed from 0.6 to 2.7 (4.5X increase YOY).

Despite the large jump, 2.7 months of inventory is still technically considered a seller’s market (4-6 months is considered to be a balanced market). Compared to 2021’s extremely low months supply of inventory of 0.6 this may feel like a buyer’s market due to the sharp increase in such a short period of time.

2023 January Data:

• Median Sales Price: $450,000 (Down 6%)
  • In certain pockets & price points, we are seeing declines in values over 15%
• Active listings: 7,323 (Up 462%)
• Closed sales: 1,634 (Down 27%)
• Average Days on Market: 76 (up 47 days from Jan 22)
• New listings: 2,988 (Up 16% YOY)
  • Up 63.4% Month-to-Month
• Pending sales: 2,581 (Down 16%YOY)
  • Up 32.4% Month-to-Month

The last 3 years have been a rollercoaster which makes tracking data challenging when looking at year over year changes. 2021 was a meteoric run up in home values, market activity, and consumer confidence. It was an unsustainable climb that has made Austin especially susceptible to a cooling market. 

Month over month changes may be a more fluid way to determine the performance of the market as things are changing quickly. All markets are both positively and negatively affected by interest rates as rate are tied to affordability for buyers.

Sticker shock set in during Q3 and Q4 of 2022 but as buyers and sellers become used to the new norm of where rates are, they start to formulate a plan and get back in the market.

Expect changes in rates up or down to have swift affects on the market that are both positive and negative. There is still pent up demand and even with layoffs in the tech sector. There are still lots of people moving to Austin looking for housing.

Dallas Real Estate Market Breakdown

2022 Recap

Total Transactions were down 13% to 97,119 closed sales. (Down from 111,187 in 2021) 2022 was on par with 2016 sold numbers.

Average price climbed 14.4 % to $484,705 (Up from $423,366 in 2021).

Months supply of inventory climbed from 0.8 to 2.2.

Dallas was less affected than Austin by the slowing market. Despite this, it still feels like a big change with months of inventory almost tripling. The run up in values in 2021 wasn’t quite as sharp in DFW as compared to Austin so the market correction doesn’t cut as deep either. 

2023  January Data:

• Median Sales Price: up 4.2% YOY 
• Market Share: 27.9% of the market share is made up of homes ranging from $300,000-$400,000
• Active listings: up 160% YOY
• Closed sales: 27.9% YOY
• Average days on market: climbed to 60 with an average of 36 additional days to close. Totaling an average of 96 days from list to close. (Up 27 days from January 2022)

Supply is increasing leading to longer days on market and an increase in months supply of inventory.  Housing permits and new construction starts are both declining which means builders are sitting on the sidelines to wait for the market to stabilize before they bring more new construction on the market.

We may see less inventory homes hitting the market and more to-be-built options will be built. This in my opinion is a good thing, because it keeps inventory down which makes resale more desirable and creates less competition in newer developments. 

Houston Real Estate Market Breakdown

2022 Recap

Total Home Sales peaked in June and then saw a more than 15% drop in closed transactions in July and those numbers continued to fall through the end of the year.

Closed transactions fell from 111,435 in 2021 to 98,189 in 2022 (a 13% decrease YOY).

Months supply of inventory climbed from 1.4 Months in 2021 to 2.6 in 2022. Also a less drastic change than other markets.

2023 January Data:

• Total Home Sales: 10 Consecutive months of falling home sales in January
• Single family home sales: 5,650, a 30.9% decline from Jan 2021 (8,177) but only a 4% decline from pre-pandemic numbers. 
• Average price: rose 1.5% to $382,000
  • These are smallest pricing bumps since October of 2019
• Active listings: climbed to 33,606 a 63.4% increase from Jan 22
• Months of inventory: 2.7, up from 1.3 in Jan 22
• Pending sales: 7,167 a 14.9% drop from last year
• Days on Market: 59, up from 39 this time last year.

Average home prices peaked in June of 22 to nearly $450,000 and have fallen to $382,000 in January of 23.  That is an almost 18% decline. All housing segments experienced negative sales. 

San Antonio Real Estate Market Breakdown

2022 Recap

Total Home sales dropped from 41,617 in 2021 to 37,059 (only a 12% drop). Which was the lowest decline of the major markets. 

Months of inventory climbed to 3.1, up from 1.4

Average price climbed to $375,000, up from $335,000 in 2021

2023 January Data:

• Closed sales: on single family homes are down 30% YOY
  • New construction sales are only down 7% 
• Days on Market: climbed to 66 a 94% increase
• Pending sales: fell 27%
• Active listings: 9,678 (climbed 120%)
• Average price: $369,668 (climbed 6% )

With inventory climbing and pending sales falling, expect to continue to move to a more balanced market where buyers have more leverage than they have had in a decade. Patience will be key for sellers. with an average list to close date range of 100 days, that is going to feel like an eternity compared to the pandemic era market where homes were flying off the shelf.

Texas Real Estate Market Expectations for 2023

We started to see signs of life in February for the first time since June of 2022. Buyers were becoming more confident that we were at the bottom and they were taking advantage of rates falling to the high 5’s and low 6’s.   

We had made it through those tough winter months and it started feeling like we had reached the bottom and were starting to come out the other side.  Interest rates fell to the low 6’s and the pent up demand started to jump on those lower rates.  Showings increased, pending listings climbed and it started to feel like things were headed in the right direction.  

And then new inflation numbers came out mid February, suggesting that we are not out of the woods yet with inflation, causing rates to jump back up close to 7% jolting the market yet again.  

Predictions for 2023

The brunt of the pain is likely behind us on falling home values. However, It may take some time to start seeing meaningful appreciation happen. We are likely at the bottom (or at least very close to it) and things will continue to flatten out as long as rates are close to 7%.  

It feels inevitable that inflation will start to taper and we will see a break in rates in the near future.  

After 7-8 months of a declining market, buyers and sellers are beginning to understand and adapt to the new market we are in that is behaving much more similarly to pre-pandemic years. 

Even if we see a spark in sales and activity, we are still in very fragile economic times. Global turmoil can have rippling effects in the US that can cause short term turbulence in the market. We should continue to expect the unexpected and act accordingly. 

We expect to see signs of life by the summer. There is still a lot of pent up demand with buyers and we now have more affordable homes with sellers willing to negotiate. 

Advice for Home-sellers in 2023

EVERYONE is price sensitive so your strategy should be focused on pricing your home in line with the market rather than price high and be willing to negotiate. Buyers have options and it’s very easy for them to just look past overpriced homes. 

This saying may be a bit cliché, but a bird in the hand is worth two in the bush is more true now than it ever has been. If you have a solid workable offer, you should be doing whatever you can to make it work.  

As a seller, you should be extremely well educated on your local market. Real estate is hyper local, meaning values can change from one pocket in your neighborhood to another. You should know what’s on the market and how your home compares. 

You should know which houses are going pending and why, finally you should understand the average days on market and the final list price to sales price ratio.  With all of this information, you will have the tools to price your home well, know how long it will take to get an offer, be able to negotiate a final price that’s in line with the market. 

Be prepared to help your buyer cover some of their closing costs to buy down their rate and make your home more affordable to them. Remember, that even though your home has likely dropped in value from it’s peak in 2021, it is more expensive on a monthly basis for a buyer due to the rising rates. 

The Bottom Line

In conclusion, Texas’ real estate market is an ever-changing landscape and predicting what the future holds can be difficult. However, by examining recent market activity, analyzing short-term trends, and making predictions based on current data gives us a better understanding of what we might expect in 2023 and beyond.

Being aware of how the market is shifting is invaluable for both established residents and potential new buyers. Whether you’re already invested or planning to enter the Lone Star State’s housing market soon, now is the time to prepare and act accordingly.

ListingSpark is here to provide you with all of the resources needed to make informed decisions concerning your real estate needs! Looking into the future has never been easier when it comes to buying or selling property in Texas — let ListingSpark help get you there!