2025 DFW Real Estate Market Review
For many, the housing market in DFW turned out to be OK in 2025.
Key Takeaways
- Home prices were lower in 2025.
- Sales trended higher.
- Supply was generally higher.
- Mortgage rates stayed lower.
Happy New Year everyone!
2025 turned out to be a rather flat year for the Dallas / Fort Worth housing market. In truth, 2025 was the third flat year in a row. But for many, this was welcome news because it meant that homes became affordable for them.
Prices Dip
By almost any measure, home prices in DFW dipped last year. Median home prices dropped -6.25% year-over-year, according to the Texas A&M Real Estate Research Center. The Case-Shiller numbers have not come out yet, so we will have to wait another month to find out how that robust index quantified home prices last year, but I'm 99% sure it will show a drop in prices as well.
The fact that prices were down overall for the 4th consecutive year was a boon to many homebuyers. According to some sources wages continued to improve last year. The combination of higher wages and lower home prices means that many who could not afford to buy a home the previous year were able to purchase a new home in 2025.
While lower prices are good for buyers, most homeowners bristle at the idea of their property values decreasing. Having said that, the reality is that unless you bought a home in the last 3-4 years, you most likely still have a decent amount of equity in your home due to the precipitous runup we had in the covid years. You probably also increased your net worth substantially during that period. All in all, if you purchased your home before 2018 or 2019, you are still in a good position with your property today.
Sales Improved in 2025
Because prices were modestly lower in 2025, sales volume picked up slightly. According to the Texas A&M Real Estate Research Center, DFW home sales were up nearly 0.41% last year. I tend to think this number is slightly misleading because for the last half of the year, sales were much higher than for the same period in 2024.
As we start 2026, it certainly seems that sales are continuing to be strong. Admittedly, this is anecdotal since there is no data out yet that demonstrates this fact. But based on what I'm seeing in many of the neighborhoods I follow, sales activity is not decreasing. And January generally tends to be a slow month.
Supply Drifted Lower
I think it is also important to note the supply figure from last year. Per the Texas A&M Research Center once again, the housing supply in DFW declined for most of the year. Months Supply—the figure most widely used to gauge housing supply—ended the year at 3.52 for Dallas / Fort Worth. While this figure is slightly higher than the end-of-year figure for 2024, what is more telling is the trend. From July on, Months Supply drifted lower each month.
This means that demand was slightly outstripping new supply for the second half of the year. Most economists say that when Months Supply is less than 6.0, we are in a seller's market. Over the last 4 years, Months Supply has crept up, but it never quite reached that 6.0 mark. Still, I think most people active in the Dallas / Fort Worth real estate market would say it has felt like a buyer's market. Now, with Months Supply trending lower, it seems that sellers are regaining some of their leverage in market deals.
Mortgage Rates Drifted Lower
In addition to lower home prices, the 30-year mortgage rate steadily declined last year. By the end of the year, the average rate was in the low 6% range.
Now, I know that to many this still seems high. And compared to the rates of 2020 and 2021, it is high. But on a broader scale, these rates are relatively low. And more importantly, they are lower than they were in 2024. Because of this and slightly lower prices, more people were able to buy last year than in recent years.
Conclusion
In short, as we begin 2026, the DFW housing market continues to be steady. Prices have declined somewhat in recent years, but sales volume is trending up and supply is trending down. In my humble opinion, I don't expect much movement either way this year. Assuming market forces remain nearly the same, I'd say we might see slightly higher prices by the end of this year as demand continues to pick up. However, the most volatile caveat is mortgage rates. As long as rates stay where they are (around 6%), higher prices and more sales seem logical. But if something happens to cause rates to rise, I think we'd likely see another year of slightly declining prices and softening sales.
As a sort of parting thought for now, the Wall Street Journal just ran an interesting article titled To Make Homes Affordable Again, Someone Has to Lose Out. I think the premise is a very good point. In a nutshell, the article focuses on the tug-of-war between first time buyers and long time homeowners. If you are a long time homeowner, you want property prices to increase. When they do, you have increased net worth, which means you have increased borrowing potential as well as increased profit potential. On the other hand, if you are a 20-something first time homebuyer, you are rooting for prices to drop so that you can afford to enter the housing market.
While this dichotomy is always with us to some degree, it has become more pronounced in recent years as home prices and mortgage rates have priced many would-be buyers out of the market. One possibility is that wages continue to rise so that eventually housing becomes relatively affordable again without prices having to decline any more. But according to the article, it would take 10 more years of current housing and wage trends to make this happen. Alternatively, rates would have to drop to under 3% again in order for the younger generations to afford housing. But that too seems very unlikely unless there is some catastrophic world event. So, what is the end game? And who will ultimately win out?
Unfortunately for younger buyers, I'm betting on the fact that politicians won't let property values decrease by much. Doing so would likely upset more of their voting base, and we all know politicians are most interested in votes....