T
exas's residential markets have finally started to return to their seasonal patterns after years of unusual fluctuations. Despite lingering headwinds from the past couple of years, many brokers expect a strong demand for homes in 2025, backed by data showing robust construction activity and good performance across major metro areas. According to Nadia Evangelou, NAR's Director of Real Estate Research, Texas is "the bright spot" with strong demand, robust construction, and good performance across major metros.
The state's housing market swelled to some of its highest highs since 2020, with median home prices in Dallas increasing by 45% from the first quarter of 2020. Brokers had anticipated a massive surge of in-migration into Austin, Houston, and Dallas due to their relative affordability, business-friendly environment, and abundant job opportunities. However, the market softened in 2024, with little to no significant movement in home prices and sales volume.
The theory now is that 2025 will be the year for a strong housing market in Texas. Reality has sunk in, and brokers have adjusted their strategies. The new home pipeline in Texas can quickly respond to demand, unlike in states with more stringent zoning and approval processes. When existing home sales dropped, new home sales jumped, leading to a convergence of inventory levels for new and existing homes across the state.
This suggests a healthy equilibrium headed into 2025, as demand for new homes helps balance the existing inventory, giving buyers more options and alleviating the supply variable in the affordability equation. Builders got savvier by offering lower mortgage rates on new homes, some at just 4 or 5 percent, while concession caps hindered resellers from doing likewise.
To compete with these new homes, listing agents are pointing potential buyers to helpful facts about older homes, such as better access to jobs and good schools. Agents who prioritize relationships over leads have been favored by brokerages, which have tightened screening processes and trimmed their rosters in anticipation of a busy season.
The luxury and ultra-luxury market has seen a huge surge in 2024, with Dallas solidifying its dominance in the Texas ultra-luxury market. High net worth newcomers have supported a diversified market, attracting further investment in infrastructure and services. However, affordability challenges continue to squeeze buyers out of the $250,000 or less range.
Industry leaders say strong demand and balanced inventory put Texas in the right position to outperform in 2025, despite external unknowns. "We're not as concerned about a downturn in 2025," said Daniel Oney, director of research at Texas A&M University's Texas Real Estate Research Center. "When we sit around the table brainstorming what might happen, [geopolitical issues] are unknowns, but we'd expect something pretty extraordinary to really damage the housing market in Texas."
