Did you know Texas is the biggest state in the nation? It’s also got a warm climate going for it, an expanding job market, tasty food, fast-growing cities, and friendly people. So clearly the Lone Star State has a lot to offer anyone thinking about moving there. Indeed, the Texas real estate forecast for 2018 is looking quite positive.

Texas home values & prices: Texas real estate forecast for 2018

While 2018 started with a number of inventory obstacles in the Texas real estate market, signs of improvement have already begun. The shortage of homes priced under $300,000 limited sales to only 1% growth and made affordability more of a challenge. Demand has been progressing at a continual high as the economy gets stronger and stronger, but rising home loan values, building permits, and housing starts indicate a positive supply response and an overall very promising real estate forecast for Texas in 2018. The real challenge for developers will be to expand inventory at the lower end of the market.

The median overall home value in Texas is $150,200, according to Zillow. Texas home values have gone up 9.5% over the past year. Meanwhile, the median home value in Austin is $335,700—a truly hot seller’s market. Austin home values have increased 8.4% over the last year, and Zillow predicts they will rise 2% more in 2018. Houston’s real estate market is slightly cooler, and considered a strong buyer’s market: the median home price currently listed is $325,000. The median home sales price in the Dallas-Fort Worth-Arlington market has soared 33% in the last three years and housing costs, which were once considered a great bargain, are now comparable to other major cities. The median sales price of a home in North Texas is now $249,000, up from just $188,300 in 2014, according to the National Association of Realtors.

Texas real estate forecast: 2018 home supply and affordability

Construction activity in Texas is inching forward as industry employment expands. Growth in weighted building permits and housing starts is speeding up, putting the Texas Residential Construction Leading Index (RCLI) at its highest level since 2007. Additionally, rendering the market friendlier, total real estate loan values in Texas reached an all-time high of $166.7 billion in Q4 2017, while loans secured by 1-to-4 family residential properties rose 7.5% quarter over quarter—the most significant growth in eight years. The apartment market saw similar growth, where loans jumped 8%, despite an overall surplus.

The Texas months of inventory (MOI) started 2018 at an all-time low of 3.4 months, down 4% year-over-year. For context, about six months’ worth of inventory is considered a balanced housing market. Supply conditions worsened in the lower end of the market as the MOI sunk below 2.9 months. The below-$300,000 price range accounts for more than 70% of homes sold through a Multiple Listing Service (MLS), so the minimal inventory in the bulk of market demonstrates declining affordability in Texas. Steady demand reduced the resale MOI to under two months in Austin, Dallas, and Fort Worth, while in Houston, resale inventories failed to bounce back to pre-Harvey levels, holding fast at 3.2 months. Texas’ new home MOI fell for the fifth straight month, sliding below 4.6 months for the first time since 2014. The MOI held at 3.7 months in Dallas while sinking to a record-low 3.3 months in Fort Worth. The Texas real estate forecast for 2018 reveals a climate where existing homes are generally less expensive than newly constructed equivalents, which adds some stress to the market.

Texas real estate forecast for 2018: Austin rents on the rise

Did you know that Austin has some of the highest rent prices in the US? It should come as no surprise, then, that renting an Austin apartment will cost more next year than it does today. A recent report by Axiometrics suggests that rent in the area could rise by around 11% between 2017 and 2020. This likely means many Austin residents will be motivated to join the ranks of homeowners sooner than later.

Houston’s unique housing market

What’s unique about the Houston housing market is how low-priced homes have not sold so well, while high-priced homes around $750,000 are highly sought after. Hurricane Harvey may have flooded homes and displaced thousands of homeowners and renters in the Houston area, but it also stimulated the construction and home rehabilitation sectors and has generated this heightened demand.