Key Takeaways

Key Takeaways Mortgage rates in Texas hit 7.2% in early 2026 , adding nearly $1,000 per month to typical home payments compared to pandemic-era rates First-time buyers now represent only 26% of purchases (down from 40% historically) while cash buyers have increased to 35% of transactions The "rate lock-in effect" is keeping inventory tight as homeowners with low rates are reluctant to sell and trade up to higher payments Regional affordability varies significantly , with San Antonio remaining most affordable and Austin seeing price corrections from 2022 peaks

Texas Housing Market 2026: What Rising Mortgage Rates Mean for Homeowners and Buyers

Look, I've been watching the Texas real estate market for over two decades, and 2026 is shaping up to be one of those years that separates the wheat from the chaff. With mortgage rates climbing to 7.2% as of February 2026 — up from the historic lows we saw just a few years back — a lot of folks are wondering what's happening to the Lone Star State's housing market.

Here's the deal: Texas isn't immune to what's happening nationally, but we've got some unique factors at play. Whether you're thinking about buying, selling, or you're stuck in a tough situation with your property, you need to understand what these trends mean for you personally.

The Current State of Texas Mortgages

Let me start with the numbers that matter. As of February 2026, the average 30-year fixed mortgage rate in Texas is sitting at 7.2%, which is slightly above the national average of 7.0%. That's a far cry from the 2-3% rates we saw during the pandemic years.

Here's what this means in real dollars: A $400,000 home (pretty typical for Texas these days) now costs about $2,661 per month in principal and interest, compared to $1,686 per month when rates were at 3%. That's nearly $1,000 more per month — or $11,700 more per year.

I had a homeowner call me last week from Austin who bought in 2021 with a 2.8% rate. His neighbor's identical house just went on the market, and potential buyers are looking at payments that are $800 higher per month. That's creating some serious sticker shock and changing how people approach home buying.

Texas Homeownership Rates: Still Strong, But Shifting

Despite the rate increases, Texas homeownership rates remain relatively stable at 63.8% as of late 2025, just slightly below the national average of 65.9%. But here's what the numbers don't tell you: the profile of who's buying homes is changing dramatically.

First-time homebuyers, who traditionally make up about 40% of the market, now represent only 26% of Texas home purchases. Why? Simple math. Between higher rates and home prices that are still 15% above pre-pandemic levels in major metro areas, many folks just can't qualify anymore.

Cash buyers, on the other hand, are having a field day. They now represent about 35% of Texas home purchases, up from 22% in 2022. At HOMESELL USA, we're seeing this firsthand — more homeowners are reaching out to us because they need to sell quickly to cash buyers rather than wait for the traditional financing process.

Regional Differences Across Texas

Texas is a big state, and what's happening in Houston isn't the same as what's happening in El Paso. Let me break it down by region:

Dallas-Fort Worth Metroplex

DFW is seeing some of the most dramatic affordability challenges. The median home price hit $425,000 in early 2026, and with current mortgage rates, you need a household income of about $130,000 to comfortably afford that payment. That's pricing out a lot of middle-class families who could buy just a few years ago.

Houston Area

Houston's market is a bit more forgiving, with median prices around $350,000. The energy sector recovery is helping support wages, but even here, we're seeing longer days on market and more price reductions than we've seen since 2018.

Austin Metro

Austin got hit hardest by the tech slowdown, and home prices have actually dropped 8% from their 2022 peaks. Even so, with a median price of $475,000, affordability is still a major issue for most buyers.

San Antonio

San Antonio remains the most affordable major Texas market, with median prices around $285,000. Military families and retirees are keeping demand steady here.

Loan Origination Trends: What Lenders Are Seeing

I talk to lenders regularly, and they're telling me some interesting things. Loan originations in Texas dropped 35% in 2025 compared to 2024, which tracks with what we're seeing nationally. But it's not just the rates — lending standards have tightened considerably.

Credit score requirements that used to be 620 for FHA loans are now effectively 640-660 if you want competitive rates. Debt-to-income ratios are being scrutinized more carefully. And don't even get me started on the documentation requirements — it's back to 2008-level paperwork.

Adjustable-rate mortgages (ARMs) are making a comeback, now representing about 12% of new originations in Texas, up from just 3% in 2022. Whether that's smart depends on your specific situation, but I'm seeing some folks get themselves into potential trouble chasing lower initial payments.

The Affordability Crisis: Real Stories from Real People

Here's what all these numbers add up to in the real world: a genuine affordability crisis for many Texas families. I've seen families who bought homes in 2020-2021 who now can't afford to move, even if they want to, because they'd be trading a 3% mortgage for a 7% mortgage.

I had a couple contact HOMESELL USA last month from Plano. They needed to relocate for work, but their current mortgage payment was $2,200 at 2.75%. To buy a comparable home in their new city, they'd be looking at $3,400 per month. They ended up selling to us and renting instead of buying.

This "rate lock-in effect" is keeping inventory tight, which is helping prop up prices even as buyer demand weakens. It's a weird market dynamic that's creating challenges for everyone.

What This Means for Different Types of Homeowners

If you're sitting on a low-rate mortgage and you're happy where you are, count your blessings and stay put if you can. That 2-3% rate you locked in is worth its weight in gold right now.

If you need to sell for any reason — job relocation, financial stress, family changes, property problems — understand that the buyer pool is smaller and pickier than it's been in years. Homes need to be priced right and show-ready to compete.

For potential buyers, this market requires a different strategy. You need larger down payments, stronger credit, and realistic expectations. The bidding wars are mostly over, but good properties at fair prices still move quickly.

Looking Ahead: What to Expect

I wish I had a crystal ball, but here's what the data and my experience tell me: We're in a transition period that's likely to last through 2026 and possibly into 2027. Rates may come down eventually, but don't expect a return to the ultra-low rates of 2020-2021.

Texas will likely continue to see population growth, which provides a floor for housing demand. But the easy money era is over, and both buyers and sellers need to adjust their expectations accordingly.

At HOMESELL USA, we're here to help folks navigate these choppy waters, whether you need to sell quickly, you're facing financial challenges, or your property has issues that make traditional sales difficult. We've helped thousands of Texas homeowners over the years, and we understand that sometimes life doesn't wait for perfect market conditions.

Whether you end up selling to us or someone else, the key is understanding your options and making decisions based on your real situation, not what the market was like three years ago. This market rewards people who are realistic, prepared, and willing to adapt.

If you're dealing with a property situation that's keeping you up at night, give Uncle Charles a call. No pressure, no judgment — just straight answers about your options in today's market. We buy houses in all 50 states, including every corner of Texas, and we've seen just about every situation you can imagine.

Frequently Asked Questions

Frequently Asked Questions

Q: Are Texas mortgage rates higher than the national average?

A: Yes, slightly. Texas mortgage rates are averaging 7.2% as of February 2026, compared to the national average of 7.0%. The difference is minimal, but Texas rates tend to be slightly higher due to regional economic factors.

Q: Should I wait for mortgage rates to come down before buying a home in Texas?

A: Look, nobody has a crystal ball, but waiting for rates to drop significantly could mean missing out on opportunities. If you find the right property at the right price and you can afford the payments, it's often better to buy now and refinance later if rates improve.

Q: How do current Texas home prices compare to pre-pandemic levels?

A: Texas home prices are still about 15% higher than pre-pandemic levels in major metro areas, though some markets like Austin have seen recent declines. Prices vary significantly by region, with San Antonio being the most affordable major market.

Q: Is it still a good time to sell my house in Texas?

A: It depends on your situation. If you have a low mortgage rate and don't need to move, staying put might be smart. But if you need to sell for any reason, properly priced homes are still selling — just be realistic about timing and pricing in today's market.

Q: What's the minimum credit score needed for a mortgage in Texas right now?

A: While FHA loans technically allow scores as low as 580, most lenders want to see 640-660 for competitive rates in today's market. Lending standards have tightened considerably compared to a few years ago.