Texas Residential Market Predicted to Remain Flat in 2024
With 2023 in the rearview mirror, many are asking what's in store for Texas real estate in 2024.
According to the Texas A&M Real Estate Research Center (TRERC), we can pretty much expect more of the same in 2024 with regards to the Texas housing market.
2023 in Review
Texas currently has roughly 8.2 million single family homes. In 2023, somewhere between 320,000 and 340,000 of these homes sold in the entire state. This compares with about 368,000 in 2022 and over 414,000 in 2021. Clearly, the trend over the past couple of years has been down. And, this is really no surprise given the interest rate environment and continued elevated prices of homes. Additionally, we have certainly seen this trend hold true in the southeast Arlington area as well.
The median price of a home in Texas at the end of 2023 was roughly $340,000, and the average monthly rent was about $2100.
2024 Residential Outlook
The TRERC believes with a high level of certainty that single family home deliveries will increase by around 4% this year statewide, which would bode well for buyers. This would add roughly 12,000 - 15,000 more homes in the state. Naturally, most of these would be built in the major metro areas. If this holds true, it means that buyers should have more choices this year as well as increased leverage with sellers, including home builders.
Barring any drastic decline in interest rates, TRERC believes that home sales should remain mostly flat. They expect around 330,000 - 340,000 homes to sell this year in the entire state. It stands to reason that if roughly the same number of homes is selling but there are more homes available, we should see a small price decrease in the median home price this year.
In fact, the TRERC says they expect home prices to stay at or below the current median price of $340,000 in 2024. Again, this could be beneficial to anyone looking to purchase a home this year.
And, in some good news for renters, TRERC expects rents to decline slightly this year statewide. The center's level of confidence in this prediction is less certain, however. The primary factor that would drive rents lower would be the recent property tax cuts that would benefit all property owners, not just homesteaders. However, as the Houston Chronicle points out, there really is no guarantee that landlords will pass those tax savings on to renters.
And, as a landlord myself, I can say that property taxes have only been one driver in the rent increases we have implemented over the past several years. We have good tenants, and our desire is to hang on to them. We know very well that increasing rents is putting pressure on renters everywhere. However, our costs of repairs and our costs to insure our properties have increased dramatically in the last five years. While, we welcome the property tax breaks, we know that in order for us to hold rents steady, we need to see our own costs of repairs and insurance also remain steady, and unfortunately, this just isn't happening.
2024 Real Estate Market Drivers
So, what exactly are the expected drivers for the Texas real estate market in 2024?
- Interest Rates - Not surprisingly, interest rates are probably the single biggest driver of residential real estate in Texas. The current federal funds rate is 5.25%-5.5%, and most economists expect that rate to remain the same or be lowered slightly in 2024. Should the Fed decide to implement a rate cut or two this year, mortgage rates would likely follow, and that could increase housing demand. Just how much rates might fall and just how much demand might increase is anyone's guess at this point.
- Jobs - As is typical in Texas, economists anticipate our state to have heftier job growth than the rest of the country. Most economists expect a growth rate of 1.1% to 2.7% in Texas this year, compared with around 1.0% in the nation. With job growth comes migration, and with migration comes higher demand for real estate. If job growth ends up being higher, we could see even more demand for housing.
- Inflation - Most experts predict that inflation will hum along at around 2%-3% this year. This would be welcome news to almost everyone, as we have all been hit with a nearly 4% rate this last year. Everything from gas to groceries to building materials has skyrocketed in recent years. If inflation cools some, it could mean more people would be able to afford a home who simply haven't been able to in the last couple of years.
- Legal and Geopolitical Issues - This is probably the single biggest wildcard in terms of market drivers. With wars raging in Ukraine and the middle east, and tensions rising elsewhere around the globe, geopolitical issues have the potential to impact every other driver of the real estate market, and thus they impact real estate itself. So long as nothing too unexpected occurs on this front, we should see minimal impact to our Texas real estate market. However, if something unexpected occurs, like another pandemic or a major war that involves the U.S., this would likely drive home prices lower.
Conclusion
In summary, the Texas A&M Real Estate Research Center anticipates 2024 being a relatively flat year for Texas residential real estate. Sales should be about the same as 2023, and prices should stay about the same or decrease slightly. Of course, this is a statewide outlook, and each individual community is going to be different.
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