After two challenging years marked by elevated mortgage rates and constrained inventory, the Texas housing market is poised for a modest recovery in 2026. According to the Texas Real Estate Research Center at Texas A&M University, home sales across the Lone Star State are expected to increase by 2.5% this year, reaching approximately 349,000 new and existing home transactions.

The 2026 Forecast

The research center's annual forecast points to several positive trends that should support increased activity:

  • Sales Volume: 349,000 total home sales, up 2.5% from 2025
  • Median Price: Expected to rise 1.3% to approximately $334,000
  • Mortgage Rates: Projected to hover near 6%, down from 2025 averages
  • Inventory: Continued improvement in available listings

"Falling interest rates in 2026 will contribute to a rebound in housing market activity in Texas. While we're not projecting a return to the frenzied market of 2021-2022, conditions are improving for both buyers and sellers."

— Texas Real Estate Research Center

Rate Relief Drives Optimism

The primary catalyst for the projected recovery is the moderation in mortgage rates. With the 30-year fixed rate falling to 6.06%—its lowest level since September 2022—financing costs have improved meaningfully from the 7%+ levels that prevailed through much of 2024 and early 2025.

For Texas buyers, lower rates translate directly to improved purchasing power:

  • A buyer at 7% could afford a $350,000 home with a $2,330 monthly payment
  • At 6%, the same payment supports a $370,000 purchase price
  • That's $20,000 more buying power without any change in income

Major Markets to Watch

Texas's major metropolitan areas each face unique dynamics heading into 2026:

Dallas-Fort Worth

The DFW metroplex remains one of the nation's strongest markets for population growth and job creation. Corporate relocations continue to drive demand, though affordability has become a growing concern as prices have risen faster than incomes.

Houston

The energy capital has benefited from elevated oil and gas prices, supporting employment in the petrochemical sector. However, insurance costs have risen sharply following recent hurricane seasons, adding to ownership expenses.

Austin

The tech-heavy Austin market has seen more significant cooling than other Texas metros, with prices declining modestly from 2022 peaks. Some analysts view this as a return to normalcy rather than a cause for concern.

San Antonio

Military and healthcare employment have provided stability, with San Antonio maintaining more affordable price points than other major Texas cities.

Inventory Improvement

One of the most positive developments for Texas buyers has been the improvement in available inventory. After years of historically tight supply that gave sellers overwhelming leverage, the market is moving toward greater balance.

Months of supply—a key measure of market balance—has increased in most Texas markets, reducing the multiple-offer situations and bidding wars that characterized the pandemic-era market. While still generally favoring sellers, conditions have improved meaningfully for buyers.

New Construction Remains Strong

Texas has been a national leader in new home construction, and builders continue to play an important role in meeting demand. The state's relatively permissive zoning regulations and available land have allowed for more development than in many coastal markets.

However, some previously hot markets like Texas and Florida have seen new-home activity slow somewhat due to what analysts describe as "limited cyclical overbuilding." The combination of elevated supply and still-high rates has made some projects less economically viable.

Affordability Challenges Persist

Despite the improvement in rates, affordability remains stretched by historical standards. The combination of prices that rose sharply during the pandemic and rates that remain elevated by pre-2022 standards means that many first-time buyers continue to face challenges.

Key affordability metrics:

  • Median Texas home price has more than doubled since 2015
  • Monthly payments remain well above 2019 levels despite rate declines
  • Down payment requirements have increased with higher prices
  • Property taxes in Texas are among the highest in the nation

What Buyers Should Consider

For prospective Texas homebuyers, 2026 presents a mixed but potentially favorable environment:

  • Pro: Rate Improvement - Financing costs have declined meaningfully
  • Pro: Better Inventory - More homes to choose from than recent years
  • Pro: Less Competition - Fewer bidding wars and more negotiating power
  • Con: High Prices - Values remain elevated despite market cooling
  • Con: Property Taxes - Texas's lack of income tax is offset by high property taxes
  • Con: Insurance Costs - Premiums have risen sharply in many areas

Seller Considerations

For Texans considering selling, the market remains generally favorable but requires realistic expectations:

  • Pricing at market value is essential; overpricing leads to extended days on market
  • Properties in good condition continue to attract strong interest
  • The days of receiving multiple offers within hours are largely over
  • Buyers have more leverage to negotiate on price and terms

Long-Term Outlook

Texas's fundamental growth drivers remain intact. The state continues to attract residents and businesses from higher-cost states, maintaining strong underlying demand for housing. Population projections suggest millions more Texans in the coming decades, supporting long-term real estate values.

For 2026 specifically, the Texas Real Estate Research Center's projection of 2.5% sales growth represents a modest but meaningful improvement from the challenged conditions of recent years. Combined with stable employment and gradually improving affordability, the Texas housing market appears to be turning a corner.