Texas Real Estate Insights

Texas Real Estate Insights: August 2023 Update Reveals Market Trends

The Texas housing market saw several interesting developments in August 2023, despite persistently high interest rates. Home sales, construction permits, and housing inventory all showed signs of change, providing insights into the state of the real estate market in Texas. In this blog post, we'll break down the key highlights from the latest Texas Housing Insight report by Texas A&M University, exploring what these trends mean for buyers, sellers, and investors.

1. Rebounding Home Sales: August was a positive month for the residential real estate industry in Texas. Total home sales picked up significantly, increasing by 9.5 percent month-over-month. While this surge in sales is encouraging, it's important to note that the sales activity was still 8 percent lower than the previous year. This growth occurred in all four major metros, suggesting a positive trend in the market.

2. New Construction on the Rise: The new construction market in Texas is on the rise, with sales of new construction homes growing by 20 percent in a year. Correspondingly, the market share of new construction sales climbed to 21.7 percent, indicating increased demand for new homes. The shortage of existing homes is contributing to this trend, as current homeowners are reluctant to give up their properties for higher-cost homes.

3. Stable Housing Market: The average days on the market (DOM) for homes in Texas dropped to 55 days, suggesting a more stable housing market. This change deviates from the steep rebounding trend observed in the past year, with the average DOM fluctuating between 55 and 59 days. Some major metros, like Austin and San Antonio, reported longer-than-average DOM, while Dallas and Houston had shorter DOM figures.

4. Growing Housing Supplies: Housing supplies are increasing, with active listings trending upward since February. In August, the number of homes available for sale rose by 5.9 percent, reaching 90,750 listings. While this is a positive sign, the months of inventory (MOI) only had a marginal decrease to 3.2 months, indicating continued demand for homes despite the increase in listings.

5. Impact of High Mortgage Rates: High mortgage rates have affected the real estate market in Texas. As the Federal Reserve initiated interest rate hikes, both treasury rates and mortgage rates increased. The 30-year fixed-rate mortgage reached 7.1 percent, up 23 basis points. This inflated mortgage rate is expected to raise the cost of homeownership and has led to a decrease in mortgage applications by over 20 percent in the past eight months.

6. Construction Permits and Starts: Texas saw a 5.3 percent month-over-month increase in single-family construction permits, with all major metros except San Antonio showing growing demand. Construction starts also grew alongside permits, with Dallas and Houston leading the way. The state's total single-family starts value reached $21.2 billion, indicating robust construction activity.

7. A Pause in Price Gains: The median home price in Texas experienced a slight dip of 0.3 percent month-over-month in August, marking the first pause in price gains this year. However, this dip is relatively moderate at $800, reflecting a balanced market. Different trends are observed among the major metros, with Dallas and Houston regaining strength in their median prices, while Austin and San Antonio show a slower pace of price growth.

Conclusion: The Texas real estate market continues to show resilience and adaptability in the face of rising interest rates and economic changes. While some indicators, like high mortgage rates, present challenges, the rebound in home sales and construction activity suggests that the market is finding a balance. Whether you're a buyer, seller, or investor, keeping an eye on these trends can help you navigate the Texas housing market effectively in the coming months. Stay tuned for further updates on the state of real estate in Texas.