The Texas housing market is undergoing a significant transformation in 2025, marked by increased inventory, declining home sales, and a shift toward a more balanced market. This evolution reflects a departure from the seller-dominated landscape of recent years, influenced by factors such as elevated mortgage rates, economic uncertainties, and changing migration patterns.

In February 2025, active housing inventory in Texas reached 124,070 homes, a 28.6% increase from the previous year, surpassing pre-pandemic levels. This surge has led to a months' supply of 4.4 months, up from 3.5 months in February 2024, indicating a shift toward a buyer's market. Concurrently, home sales declined by 4.5% year-over-year, with 23,080 transactions recorded in February 2025. The median sales price stood at $328,000, slightly down from $332,700 the previous year.

Major metropolitan areas are experiencing varied impacts. In Austin, the median sales price decreased from $450,000 in March 2024 to $446,000 in March 2025, continuing a downward trend from the 2022 peak of $521,100. San Antonio is projected to see the largest price decrease among major Texas cities in 2025, with a forecasted drop of 4.0%, attributed to a 45.4% year-over-year surge in inventory.

Several factors contribute to this market correction. Elevated mortgage rates near 7% have dampened buyer affordability, leading to decreased demand. Economic uncertainties, including concerns over potential slowdowns from restrictive tariff policies and heightened inflation expectations, have made buyers more cautious. Additionally, while Texas has been a destination for out-of-state buyers, affordability challenges in cities like Austin have slowed growth rates, as potential residents seek more affordable alternatives.

The increase in inventory and decrease in sales indicate a shift toward a buyer's market, providing buyers with more leverage and time to make decisions. However, the combination of high mortgage rates and rising home prices continues to lock many potential buyers, especially first-timers, out of homeownership.

This correction follows a period of rapid price appreciation and low inventory during the pandemic years. The market is now adjusting to more balanced conditions, with inventory levels exceeding pre-pandemic figures.

In response to these challenges, Texas lawmakers are working to reduce the state's high homeowners' insurance costs, which surged nearly 19% in 2024 following a 21% increase the previous year. Despite limited legislative control over key cost drivers—such as climate change, inflation, and increased construction costs—lawmakers have introduced multiple proposals. One measure, Senate Bill 1643, would require state approval for insurance rate hikes above 10%. Supporters argue it provides greater regulatory scrutiny, while opponents caution that it could lead to unintended consequences like insurers avoiding large increases or canceling policies.

The Texas housing market in 2025 is undergoing a significant transformation, with increased inventory and declining sales signaling a shift toward a buyer's market. While challenges such as high mortgage rates and economic uncertainty persist, the current trends offer potential opportunities for buyers and indicate a move toward more balanced market conditions.