For many buyers, hot markets like Austin makes house hunting in Texas a terrible idea. Yet, Texas may just have the perfect real estate market for your needs.
To save time and money, consider the housing markets of Houston, Fort Worth, and McAllen. In general, look for markets with a good price-to-square-foot ratio, low new listing median prices, long average and median days on market, frequent price drops, high inventory, and relisted property.
Before we dive into the details of house hunting in Texas, I’ll talk about the basics of saving and explain how to evaluate a housing market.
9 Common House Hunting Strategies For Saving
House hunting is a comprehensive survey of your finances, purchasing power, prospective markets and properties, mortgaging, moving, and renovation costs. Proper planning can save you thousands of dollars and hundreds of hours. Here are 9 things to do for a smooth house-hunting experience.
- Look into real estate terminology and financing terminology, along with the process. Time and consequently money is lost translating these terms to casual language.
- Track real estate market data online. Note the markets’ supply vs demand, listing prices, per square foot costs, neighborhood, and noteworthy facilities in the vicinity. Slowly build up a list of prospective properties.
- Use the 28/36 formula to create a price range. Projected spending on housing should be within 28% of income, and overall debt payment should be less than 36%.
- Categorize selected properties into ready-to-move-in, renovation, and potential steals. Do walkthroughs of the ready-to-move-in houses and get a clear idea of your wants and the standard cost. Find cheaper options in the other 2 categories.
- Bigger down payments save big on financing. Don’t go for the 3.5% rate and try to pay 20% or more as a down payment.
- Don’t take mortgages spanning more than 10 years. Intensive installments help you avoid paying thousands in interest.
- To expedite your mortgage underwriting, have a good credit score and a thorough credit history. Having a credit score over 711 is ideal, although for younger buyers, 660-672 is acceptable.
- Don’t rush for FHA loans, and opt for PMI instead. You can get lower than the standard 6.33% rate and fixed installments from PMIs.
- Housing agents will take a 2.5-3% fee, and it’s negotiable. Or you can skip them entirely, like 50% of buyers did in 2021 according to NAR.
Prioritize understanding your budget and then cost. Imagine that you took a 6.33% rate, a 120-month mortgage with $108,000 as a down payment. Using the Texas average 1.81% property tax rate and $250 HOA fees, and the US average of $1,233 in monthly dues, you can afford a house up to $638,250. Understanding your range narrows down your prospects and saves you time and money.
Understanding The Texas Housing Markets, Fast
Understanding Texas housing markets will require knowledge about some driving factors. I’ll focus on the most important 7 factors here.
- Median List Price: This gives you an idea of whether the ideal houses are within your range. But even if it’s about $70,000-$100,000 out of your range, you can find good prospects in a market.
- Newly Listed Median Price: If you see newer listings have a lower median price than older ones, you can find cheaper listings with room for negotiations.
- Average And Median Days On Market: The longer listings stay on the market, the more likely they are to be available for negotiation. Expect some sellers to hold on to their properties even with buyers and potential deal breakers. However, longer than 45 days is a good indicator of low buyer numbers and desperate sellers.
- Price Drop: Properties with price drops are picks for potential hidden gems. These are either overpriced, bad-value, or high-value houses with potential you can snatch up at bargain prices.
- Relisting: Relisting is a tricky factor to read. Low, recurring rates tell you that bad-value houses are coming up over and over. High rates indicate that the market is in a bad state. You’ll want an ideal rate of 15-27%, which, combined with price drops, can be a good opportunity.
- Inventory: Low inventory can drive up price and demand. High inventory, decent relists, and price drop combined can put you in an advantageous position.
- Per Square Foot Cost: This is a no-nonsense indicator of how much property you get per dollar. But if it’s too low, that can indicate unwanted, bad-value properties. The ideal range would be $123-$215 per square foot.
These factors are the most important tells of whether a housing market is worth your attention. And the best part is you can find all of this data online. You can even track markets and their history to understand if it’s a prospect. None of your research will cost you a dollar and won’t take any more time than a casual web search.
3 Best Housing Markets In November 2022 In Texas Explained
To help expedite your house hunting in Texas, I’ll be talking about the best 3 housing markets in November 2022 in the state. Now that you know the factors and parameters, you use these as examples to learn what a prospective housing market looks like.
Houston
Houston is a great housing market for buyers with a typical budget. The median house price is $359,900, and for new listings, it is $329,995. New listings are going for lower prices, which gives you an opening to look for cheaper prices.
The per-square-foot cost in Houston is $175. This is within the ideal range. However, for $895,000 you’re getting a lot size of 8,000 – 10,000 square feet and a 3,348 square feet house. Instead, you can spend $306,450 to get 6,500 – 8,000 square feet lots and 2,020 square feet houses. This is the ideal zone.
Houston has a high inventory of 4,901, with a 49% price drop rate and 17% relists. This is ideal for hidden gems that you argue for and get bargain deals on high-value prospects. You also have room to reach above your range.
The average days on market for houses is 81, while the median is 49. This can indicate sellers holding onto houses, but the price drop and high inventory indicate otherwise. You’re likely to encounter desperate sellers who overinflated the price and can’t find buyers.
Fort Worth
Fort Worth is the best market of all so far, in terms of price to real estate. The median list price is $346,900 and for new listings, it’s at $325,500. The lower new listings indicate dropping prices.
Per square foot, you have to pay $181 in Fort Worth, which seems worse than in Houston. But TCU homes are actually giving you more for your money. In general, for only spending $550,000 you can get lots 0.25 – 0.5 acre in size and houses that are 3,025 square feet. No other price brackets come close to this value, and it leaves you a large lot with plenty of room for renovation.
Inventory is lower, at 1,727. Fort Worth has 7% relists with 60% price-dropping sellers. This is due to the inflated prices of 2019-2022 finally crashing, and your ideal choice to grab high-value, large real estate. And the lower inventory indicates that they may have active buyers.
The average days on market is 59, with the median at 42. This tells you that houses are going faster. Typically, you would have less room to bargain. But the price drop rate tells you the opposite.
McAllen
McAllen is the second best in terms of price to real estate and also second in priority for people with a typical range. The median list price is $338,650, and the newer listings have a median price of $322,500. It’s lower than the other 2 markets with a further dropping price.
You also spend the least per square foot in McAllen, only $147. The lower cost bracket is a huge steal, offering 6,500 – 8,000 square feet lots and 2,018 square feet houses for only $291,250.
However, the inventory is incredibly low at 254, an increase from October 2022. Combined with 43% price drops and 9% relists, it’s a market that’s bound to be swarmed by buyers. You’ll have less opportunity for negotiation here.
The average days on market is 93, and the median is 56. The median days is the key here, as it shows good houses are still selling at an acceptable delay. You would think that 93 days is too long and the properties are bad. But in truth, the houses you want are selling at a normal pace.
Looking at the 3 markets, you can understand that no factors in isolation will tell you anything concrete. So, compare and merge all factors to create a proper image of a market. Once again, house hunting in Texas won’t require a real estate agent or hours spent on walkthroughs. Save your time and money by researching online in your spare time, and take 4-5 months to understand housing market trends.
