Forecast: Austin, Dallas, Houston Housing Markets Will Sizzle in 2021

Recent forecasts for the housing markets in Austin, Dallas and Houston have predicted rising home values during 2021.

Houston skyline at night. (Pixabay)

And that’s no surprise, when you look at current supply and demand conditions within these hot markets. Aside from being three of Texas’s most populous cities, Austin, Dallas and Houston share something else in common. They’s all experiencing significant population growth.

This growth comes at a time when housing inventory remains well below historical norms. As a result, the competitive real estate markets in Austin, Dallas and Houston will probably continue to outperform the nation in 2021, in terms of sales and price growth.

Major Population Growth in Texas’s Major Cities

In terms of population, the Austin, Dallas and Houston real estate markets are booming. And they have been for years.

A recent, in-depth population study conducted by the housing market research team at Freddie Mac found that these metro areas grew by nearly 3 million people over the past decade.

To quote their January 2021 report:

“Over the last decade, population in absolute numbers increased the most in multiple MSAs within Texas and Florida. Specifically, population in three MSAs in Texas grew by a combined total of 2.8 million: Dallas (1.2 million), Houston (1.1 million), and Austin (0.5 million).”

You don’t have to be an economist to know that a growing population tends to increase demand within the housing market. After all, those new residents need somewhere to reside — whether that means renting an apartment, or buying a home.

And lately, many of them appear to be buying. The real estate markets in Austin, Dallas, and Houston have seen steady sales activity throughout the pandemic. Home sales and prices have hit record highs in these areas.

That might seem counterintuitive, given the challenging economic times we find ourselves in. But there’s no denying the data. These housing markets are hot right now, and they’ll continue to sizzle in 2021.

Here’s one example, a quote from a January 29 article in the Austin American-Statesman:

“The Austin Board of Realtors said last year was another record year for the region’s housing market. The board said home sales (it’s numbers primarily are for pre-owned homes) and the median sales price — $344,000 — hit all-time highs for the 10th straight year.”

Similar trends and records are being reported within the Dallas and Houston real estate markets. Agents across the North Texas region (which comprises the Dallas-Fort Worth metro area) sold a record of more than 119,000 single-family homes during 2020.

Home sales in the Houston metro area also hit a record high last year.

Strong Forecasts for Austin, Dallas and Houston Housing Markets

Housing market forecasts for 2021 predict that Austin, Dallas and Houston will see continued home-price growth for the foreseeable future. Forecasts from researchers at Realtor.com and Zillow both predict that prices will continue moving north, to varying degrees.

A December 2020 housing market forecast from Realtor.com, for example, suggested that home values in these metro areas would rise by around 4.4% to 4.6% during 2021.

Zillow predicted even bigger gains, particularly for the Austin area. They see prices rising somewhere between 6% and 10% in Texas’s major cities. And that’s probably a more realistic prediction, given the rapid rate of appreciation we’ve seen over the past year or so.

Home prices in Houston rose by around 7.2% over the past year or so. Dallas house values climbed by more than 9% during that 12-month period, and Austin posted the biggest gain with a 14% increase in its median home value. That’s from January 2020 to January 2021.

Here are the median home values for these metros, as of January 2021:

  • Austin-Round Rock: $378,454
  • Dallas-Fort Worth-Arlington: $270,757
  • Houston-The Woodlands-Sugar Land: $228,789

Given these past trends, it’s no surprise to see the Austin, Dallas and Houston real estate markets receiving positive forecasts for 2021 as well. Not even the coronavirus pandemic can cool these hot housing scenes.

Ongoing Supply-and-Demand Imbalance

The main reason why Austin, Dallas and Houston are getting such strong housing market forecasts for this year can be summed up in five words:

Low supply and high demand.

We’ve talked about the demand side of the equation already. Above-average population growth has brought more home buyers into these real estate markets, boosting sales and prices along the way.

To quote the Freddie Mac population study again:

“The U.S. population has been moving South and West over time. Within the South, Texas and Florida witnessed the greatest increases in population.”

On the supply side of things, tight inventory conditions are making it harder for home buyers to locate a suitable property. There are plenty of buyers within the Austin, Dallas and Houston housing markets, but not enough properties to go around.

This imbalance between supply and demand has made these real estate markets highly competitive over the past year, with more of the same expected in the future.

As of January 2021, all three of these metro areas had less than a 2-month supply of homes for sale. That’s a theoretical metric that allows us to track inventory levels over time. It shows that the real estate markets in Austin, Dallas and Houston are still suffering from a steep supply shortage.

As of January, the Austin metro area had the tightest inventory conditions of all. Housing supply is hovering at historically low levels across the five-county Austin-Round Rock-San Marcos metro area.

The message to home buyers remains clear. If you’re planning to purchase a house in one of these major Texas cities during 2021, you should expect competition. Buyers will want to start the search as soon as possible and consider surrounding areas. Having an experienced real estate agent also helps.

Disclaimer: This article includes housing market forecasts for the Austin, Dallas and Houston metro areas in 2021. Those projections were issued by third parties not associated with the Home Buying Institute and are the equivalent of an educated guess. HBI makes no claims about future real estate conditions, prices, etc.