The Texas housing market is experiencing a significant correction, marked by increased inventory, declining home sales, and downward pressure on prices. This shift follows a period of rapid growth during the COVID-19 pandemic and is influenced by various economic factors.

In January 2025, active listings in Texas reached approximately 120,100, marking a nearly 30% year-over-year increase and the highest level in a decade. This surge has resulted in a months' supply of about 4.5 months, surpassing pre-pandemic levels. Concurrently, home sales have declined, with the Austin area experiencing a 9.1% drop in February 2025 compared to the same period in 2024, totaling 6,698 transactions. Additionally, 80.2% of homes sold below their original listing price, reflecting increased buyer negotiating power.

During the pandemic, Texas, particularly cities like Austin, saw a housing boom with homes often selling above asking price due to high demand and limited supply. The market is now correcting, with increased inventory and declining sales indicating a rebalancing.

Statewide, 25.5% of homes for sale had a price cut in 2025, up from 23.3% in 2024 and 22.0% in 2023, indicating sellers are responding to weaker demand and affordability concerns.

Mortgage rates have remained elevated, hovering between 6% and 7%, which has dampened buyer confidence and affordability. Persistent inflation and global trade tensions have led to cautious buyer behavior and economic uncertainty, contributing to the market slowdown. In Austin, tech layoffs and hiring freezes have created uncertainty for potential buyers, further cooling demand.

In Austin, the median home price declined by 4% year-over-year to $410,000 in February 2025. Despite this, sales activity increased by 5%, and inventory levels rose to 3.6 months with active listings up 24.6%. In San Antonio, institutional investors have reduced their share of home purchases, buying 9.5% of homes sold in 2024, down from previous years. This trend reflects a broader national retreat by such investors.

Despite increased inventory, affordability remains a significant issue. In Austin, the median sales price is still about 40% higher compared to 2019, making homeownership challenging for many residents. The current correction indicates a rebalancing of the market, moving away from the COVID-era housing boom where many homes sold above asking price. This shift has potential implications for homeowners, buyers, and the broader Texas economy.

The Texas housing market has experienced fluctuations in the past, but the current correction is notable for its rapid inventory increase and price adjustments following the unprecedented growth during the pandemic. The last time inventory levels were this high was over a decade ago, highlighting the significant shift in market dynamics.

The Texas housing market is experiencing a significant correction, marked by increased inventory, declining sales, and downward pressure on prices. While this shift may offer opportunities for buyers, affordability challenges persist, and the market's trajectory will depend on factors such as mortgage rates, economic conditions, and local job markets.