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1st Time Homebuyer Texas

Cheap Houses in Texas: What to be Aware of

Texas is a great state to live in.  So why are houses cheaper here than other places? As a mortgage broker, people ask me that all the time. They see home prices in California and can’t believe someone paid so much. Why is it different here?

Historically speaking, Texas has had low land prices, coupled with low wages. This has combined to keep housing prices lower than other states, particularly in non-urban areas.

Land and wages. Is that all it comes down to?  Since Texas has so much land and lower wages, the houses are less expensive?  That sounds really simple.  Honestly, there is a bit more to it.

What Causes Housing in Texas to be so Cheap?

Housing prices are based primarily on only 2 things. 

  1. Supply
  2. Demand

If there is a high demand for housing, but not a lot of housing available, prices go up.  If there are a lot of houses available, but no one wants to buy them, prices go down.

How much the prices fluctuate will depend on other forces like

  • Interest rates
  • Unemployment rates
  • Average income

But the bottom line is ALWAYS supply and demand.

Because Texas has a lot of open, available land, when demand goes up, new homes can be built quickly on open land. This allows the price of those new homes to stay less expensive than they would be otherwise. This new home market limits how much the resale market can charge for homes. You aren’t going to pay $300,000 for a used home, if you can get a comparable new home for $200,000, are you?

Also, income plays a part.  Most people can’t buy a house for cash.  They have to get a mortgage or a loan.  The amount of that loan is based, in part, on income level. If wages are low, people can’t qualify for high mortgages. If no one can qualify to buy a home, demand drops.  When demand drops, prices drop.

Are Houses in Texas Really Cheap?

Compared to some places, Texas is incredibly cheap!  By cheap, understand we mean inexpensive, not poor quality (though there is some of that, too).  According to Zillow, the average home in California is valued at $578,267.  Zillow shows the average home in Texas is valued at $211,199.  That’s quite a big difference and you can easily see why some people might say homes in Texas are cheap.

Many people like to use a simple side-by-side comparison to determine cost.  One of those measurements is the price per square foot option.  If a home is 2,000 square feet in size, and the price is $200,000, then the price per square foot is 200,000 ÷ 2000 or $100 per square foot.

Zillow states that the average price per square foot (pps) is currently around $202 in Dallas.  If you compare that to the average price per square foot in Amarillo, which is $106, houses in Amarillo are cheaper than they are in Dallas.  In Texas overall, the average runs around $130 per square foot.

DallasAmarilloState of Texas
$202$106$130
Price Per Square Foot Comparison

Another way to look at this is to compare the total price of a 2,000 square foot home in each location, based on their average price per square foot.

DallasAmarilloState of Texas
$404,000$212,000$260,000
Total Price Comparison (Same Square Footage)

What that tells you is that home prices in Texas vary, depending on location, just like they do in any other State.  Once again, we are back to supply and demand.

Understand, the price per square foot idea does not include special features like upgraded amenities, it is just one tool that can be used quickly and easily to help with comparisons.  Also, you need to consider how much land the home is on, views, general location and other aspects to the house beyond just price per square foot.

Are Home Prices in Texas Going Up?

In most areas, yes, they are.  In 2019, home prices increased an average of 3% throughout the State of Texas. Prior to the Covid-19 outbreak, The Dallas News reported real estate forecasts for the Texas housing market expected price increases between 5% and 6% in 2020.  However, with the changes that the Covid-19 situation has brought, there are now estimates from Zillow that show the market could fall by as much as 2% over the next 12 months.  Only time will tell.

As life returns to “normal,” supply and demand will again play their part in the housing market.  Texas is growing at a rate much higher than the National average. Those people will increase demand for homes in Texas.  That increased demand, coupled with increased wages associated with better paying jobs, will result in home prices going up.

Is it Too Late to Buy in Texas?

It’s never too late to buy.  A better question would be if there are still great deals to be had in Texas.  The answer is yes!  A great deal is based on more than just price per square foot.  A great deal is based on finding the home of your dreams, in a price you can afford and an area you love.

Step one is identifying how much you can afford to spend on a home, or how much of a mortgage you can qualify for.

There are a lot of mortgage options available.  Each has its own requirements, which can include:

  • Income requirements
  • Minimum credit rating
  • Down payment and
  • Debt to income ratio limitations.

You need to talk with a professional mortgage broker to get the best information.  Each situation is unique and only a professional is trained to get you the best loan possible.

Final Thoughts

Texas home prices range from an average of $113,400 in El Paso to $327,40 in Plano. Compared to many parts of the United States, these home prices are cheap, indeed.  That does not mean they are cheap to you.

What is cheap or expensive to you has to do with what your income levels are, what your expenses are and what kind of a mortgage you can qualify for.

By Lah

My vision in the mortgage industry is to NOT be just another application emailed to any borrowers. I want my clients to know I'm here for them even after they get approved for their home loan.

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NMLS# 497075
NXT Mortgage NMLS# 1582332

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