Sep 09, 2024

Texas Housing Markets Show Signs of Moderation Among Sun Belt States

Texas housing markets are showing signs of moderation, offering potential homebuyers better opportunities compared to other Sun Belt states.

While many Sun Belt states experience significant housing premiums, Texas housing markets are showing signs of moderation, making them more appealing to homebuyers. According to a study from Florida Atlantic University and Florida International University, Texas cities such as El Paso, Dallas, and Houston have some of the lowest housing premiums among the Sun Belt states. The study highlights that while most Sun Belt states continue to face inflated housing prices, cities in Texas may offer better buying opportunities as prices align more closely with historical trends.

Texas Housing Markets Offer Better Opportunities Among Sun Belt States

As several Sun Belt states face some of the highest housing premiums in the nation, metropolitan areas in Texas are showing signs of moderation, which could provide more favorable options for homebuyers. According to research from Florida Atlantic University (FAU) and Florida International University (FIU), housing premiums in Texas are among the lowest compared to other Sun Belt states.

Data from the Top 100 U.S. Housing Markets, which examines housing premiums, shows that the typical home in El Paso, Texas, is 24.20% overvalued relative to its historical average. This is followed by Dallas at 22.17%, McAllen at 19.15%, Houston at 16.02%, Austin at 12.46%, and San Antonio at 11.49%. In comparison, 17 of the top 20 most overvalued housing markets in the U.S. are located in Sun Belt states, with premiums exceeding 30%.

Texas Markets Show Signs of Moderation

“The housing market in Texas may be moderating, providing better opportunities for homebuyers compared to other metros in the Sun Belt,” said Ken H. Johnson, Ph.D., real estate economist at FAU’s College of Business. “Austin, in particular, is noteworthy as rents are trading at a discount, and the housing premium is only slightly above its long-term average. Often, rental trends serve as a leading indicator for home prices.”

Other Texas cities like San Antonio and Dallas are also seeing rents trade at a discount, signaling that home prices in these areas may further moderate in the coming months.

Housing Premiums Across the Nation

The Top 100 U.S. Housing Markets, a monthly index produced by FAU’s Real Estate Initiative and co-created with Eli Beracha, Ph.D., director of FIU’s Hollo School of Real Estate, measures housing premiums and discounts across major metropolitan areas by comparing actual average home prices to historical price trends.

Some of the most overvalued housing markets include Atlanta, where homes are 40.94% overvalued; Detroit at 40.78%; Cape Coral at 37.60%; and Las Vegas at 37.55%. Other notable cities include Knoxville, Tampa, Palm Bay, Charlotte, Orlando, and Lakeland, all of which have housing premiums over 35%.

The Bottom Line: A Shift in the Sun Belt?

“These markets have led the nation in housing premiums for nearly a year,” said Beracha. “However, while rental rates in these overvalued markets are beginning to moderate, they are still behind what we're seeing in Texas. This could indicate the beginning of slowing home prices across the Sun Belt states, though more time is needed to fully assess the trend.”

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