Texas has been one of the hottest housing markets over the last decade. Thanks to booming cities like Austin, Dallas, Houston and San Antonio; coupled with no state taxes many Americans have flocked to the Lonestar state and driven up property prices.
But the question being asked my many buyers, renters, sellers and investors is whether home prices will continue to rise into 2022 and 2023, or fall as the country enters into a recession and interest rates rise as the Federal reserve fights inflation.
Average Home Prices
The average home price in Texas has risen considerably in the last two plus years from $278,000 at the start of 2020 to over $380,000 by mid-2022. This is over 35% – well above the national average. In some cities like Austin, the rise has been over 60% in many suburbs.
“Over the last year home prices in Austin alone are up over 30%. Dallas-Fort Worth, Houston and San Antonio are up over 18%. Double digit increases are happening all around Texas.
What Experts Are Saying On Texas Home Price Trends
There is a lot of news online on the Texas Housing market, but the following are trends and common views:
- The market will slow down in 2022 and 2023, but due to the persistent housing supply shortage and immigration from other states, home prices will stay elevated and above national averages
- Mortgage rates will continue rising during 2022, which will impact new home buyer affordability the most. However homes above $1 million will continue to see strong demand given target buyers have more financial flexibility.
- Texas housing is still cheap compared to similar areas in California, New York and Seattle. Richer Americans from these states will continue moving to Texas, providing a buffer to home prices.
- Rents will continue to rise as home affordability rises and intra-state migrants continue to move into taxes.
Should I Buy or Rent?
This is a question that will depend on your price range and time horizon. But simply put, if you are looking to buy home for at least 5 or more years then buying in 2022 could be a good idea to lock in lower rates now.
You may also want to consider a 7/1 or 10/1 Adjustable rate mortgage (ARM) as interest rates will likely fall after 2024. These ARM loans generally provide lower rate than 30 year fixed loans due to the additional interest rate rest risk at the end of the fixed rate period – 7 years or 10 years.
With housing inventory unlikely to increase rapidly, buying your target house may be easier as people temporarily get nervous. But once certainty returns to the market, housing demand will return and could push prices even higher.
The one caveat is that you should not over extend yourself to buy your desired home. Make sure you can make your mortgage payment in the event of a job loss or a 50% cut to your household income for at least 6 months.
If you are in no rush to buy or only looking to buy for the short term, then consider waiting until after summer before buying. This is where renting may be a better short term option in the even that America enters into a recession.
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