As Texas continues to grapple with rising interest rates, the housing market is experiencing a noticeable slowdown, impacting both buyers and sellers alike.
According to a recent report from the Texas A&M Real Estate Center, the average 30-year fixed mortgage rate has surged to 7.5% as of August 2026, up from 3.2% just two years prior. This sharp increase has forced many prospective homebuyers to reconsider their purchasing power, resulting in a significant dip in sales across major Texas cities.
In Houston, for instance, home sales fell by 25% year-over-year in July 2026, a trend that local real estate agents attribute directly to the rising cost of borrowing. "We’re seeing buyers pull back significantly; many are waiting to see if rates will stabilize or fall before making a purchase," said Jennifer Moore, a leading agent with Keller Williams Realty in Houston.
Similarly, in Austin, where the tech boom has driven demand for housing, sales dipped by 18% in the same period, according to the Austin Board of Realtors. The median home price now stands at $650,000, a figure that has become increasingly out of reach for many potential buyers.
“The market is adjusting,” explained Dr. Mark Dotzour, chief economist at the Texas A&M Real Estate Center. “Higher interest rates are squeezing affordability, which is pushing some buyers out of the market while also cooling off the frenzy we’ve seen in the past few years.”
Despite the slowdown in sales, home prices have not yet seen a corresponding decline, with many sellers still holding firm on their asking prices. The average home price in Dallas is currently $720,000, a 10% increase from last year, as sellers remain optimistic about the long-term value of their properties.
As the market braces for further rate hikes from the Federal Reserve, real estate experts are divided on what the future holds. Some predict a gradual stabilization of prices as supply begins to outpace demand, while others argue that a potential recession could bring even more uncertainty to the housing sector.
In the commercial real estate sector, the situation is somewhat different. Vacancy rates for office space in Texas cities have risen as remote work persists, causing landlords and developers to adjust their strategies. The Houston office market saw a vacancy rate of 25% in Q2 2026, up from 20% just a year prior.
“Companies are reevaluating their office needs in the wake of the pandemic, and that’s leading to a lot of new opportunities in the market, especially for adaptive reuse projects,” noted Tom Johnson, CEO of Texas Commercial Realty.
As Texas navigates these challenging waters, both homebuyers and real estate professionals are bracing for a potentially protracted adjustment period, marking a significant shift in the state’s once-booming housing landscape.