By: Mark Sprague, Independence Title’s Director of Information Capital
TEXAS VS. US
With the perceived slowdown, how does the Texas economy compare with the national economy? The Texas economy is significantly outpacing the national economy in 2026, boasting a record $2.9 trillion Gross Domestic Product (GDP). Texas is growing at a 2.5% inflation-adjusted rate—about four times faster than the national economy over the last 12-month period.
Key Economic Indicators:
- GDP: as stated, Texas’s economic output reached $2.9 trillion. If it were an independent country, Texas would rank as the 8th-largest economy in the world.
- Job Creation: After a sluggish 2025, the Texas labor market has improved — more slowly than in the last 5 years, but still better than the national picture. Texas added 117,200 non-farm jobs over the most recent 12-month period, continuing to outpace the national annual job growth rate. This brings the state’s total non-farm employment to a record-setting high of over 14.4 million jobs.
- Unemployment Rate: The statewide unemployment rate sits at 4.3%, matching the national average.
- Taxes: Texas continues to maintain one of the most competitive tax environments in the country, featuring zero state income tax and a relatively low overall tax burden (ranking 43rd in total tax burden).
Drivers of Texas’ Accelerated Performance:
- Industry Boom: Growth is heavily fueled by surging artificial intelligence (AI) investments, significant data center construction, and a strong rebound in manufacturing. Technology employment in Texas is experiencing a stabilization and targeted rebound in 2026, with the state projected to lead the nation in new tech job gains by adding over 32,000 technology positions. While overall headcounts remained largely flat after a modest dip in 2025, hiring in 2026 is highly selective and focused on specialized infrastructure.
- Energy Production: Texas continues to produce approximately half of the nation’s crude oil, a core pillar of economic strength despite volatile energy prices.
- Business Climate: Pro-growth policies, low taxes, and deregulation continue to drive corporate relocations and expansions.
MORTGAGE RATES STABLE AT MID-6% RANGE PROBABLY THROUGH THE REST OF THE YEAR
The national average for a 30-year fixed mortgage is sitting around 6.4% to 6.6%.
Since last week’s spike in mortgage rates to just over 6.6%, rates have dropped to just over 6.4%. The sudden spike and subsequent drop were both reactions to fluctuations in the U.S. economy. Mortgage rates move based on the buying and selling of Mortgage-Backed Securities (MBS) in the secondary market, primarily driven by inflation trends, Federal Reserve monetary policy, the broader economic outlook, and housing market supply and demand.
Unpacking the elements influencing rate fluctuations:
- Mortgage-Backed Securities (MBS): Mortgages are bundled and sold as bonds to investors. When MBS demand is high, MBS prices rise, and mortgage rates fall. When bond investors demand higher yields (often during inflation), mortgage rates rise.
- The 10-Year Treasury Yield: Mortgage rates closely track 10-year Treasury yields. When Treasury yields increase due to broader economic forces, mortgage rates typically increase as well.
- Inflation: High or rapidly rising inflation reduces the purchasing power of fixed returns. Investors require higher yields to offset this risk, which directly pushes mortgage rates upward.
- Federal Reserve Policy: While the Fed does not directly set 30-year mortgage rates, its decisions on the federal funds rate strongly influence short-term borrowing costs, inflation expectations, and broader financial market sentiment.
- Employment and Economic Growth: A strong economy—characterized by low unemployment and high GDP growth—typically pushes mortgage rates higher due to increased competition for loans. Conversely, economic slowdowns generally lead to lower rates.
- Global and Geopolitical Events: International conflicts or significant domestic events (like major elections) create uncertainty. During uncertain times, investors often flock to safe-haven assets like government bonds, which can push down mortgage rates.
- Housing Market Dynamics: When housing supply is low and buyer demand is intense, lenders may raise rates to manage loan volumes and risk.
What is happening presently:
- Federal Funds Rate: The Fed has largely hit pause on rate cuts as it balances inflation concerns—partially fueled by energy and oil prices—with a surprisingly resilient job market and economy.
- What Could Change Things: Experts suggest the Fed will hold rates where they are for the time being and cut rates only if the labor market weakens significantly.
HAS THE TEXAS HOUSING MARKET TURNED?
- Following months of rising inventory, the supply buildup is beginning to weigh more heavily on sellers in the Texas housing market, becoming more of a ‘buyers’ market’ with increasing inventory. We’re seeing sellers increasingly pricing appropriately to attract buyers. At the same time, record-high inventory levels are offering buyers a wider choice and negotiation leverage not seen in recent market cycles.
- During earlier phases of the rate shock cycle, higher mortgage rates often cause a freeze effect. (In the last 60 years, every time there has been a rate change, we have had a recession. Not this time.) Sellers pulled listings, buyers stepped back, and transactions slowed as the market recalibrated expectations. Today’s 2026 market appears to be adjusting to the higher rates.
- In Texas metros, after three consecutive months of moderate year-over-year (YoY) median price declines, May’s 2026 home sales rebounded to match levels recorded in the same period last year. Forward-looking pending sales data now point to another upswing in June closings, signaling potential stabilization in activity as the peak spring cycle approaches. However, year-to-date home sales (January through May) continue to lag 2024. (Although homes priced under $500K have less than 3 months inventory statewide. Inventory increases in the $500K to $1M range, depending on the neighborhood and school district, but still generally under 6 months’ equilibrium. Inventory above $1M depends on location.)
- While weaker demand and sellers’ confidence steadily push inventory higher, rising seller activity (new listings) has further contributed to the supply surge. Most are hoping to capitalize on peak prices during the busiest spring buying season, undeterred by the already elevated inventory. Seller activity is outpacing demand by nearly two to one.
- A balanced housing market depends on sustained buyer activity to maintain healthy inventory levels, keep overall supply in check, and keep property values stable. However, the perceived higher mortgage rates—averaging in the upper 6 percent to near 7 percent range—remain a significant obstacle to buyer affordability. (Historical 50-year average is 7.7%)
- The good news is that sellers are listening and bringing prices closer to the neighborhood median. We are seeing average sale prices within 9% of the original list price and within 1% or 2% of the last list price. Statewide, May marked the first time YoY home price change approached zero amid mounting inventory pressure and intensifying seller price reductions. Early signs of value stabilization are emerging in key markets such as Dallas-Fort Worth, Houston, and San Antonio, while prices in Austin are stabilizing, depending on the price point. (Under $500K is gently rising.)
- Continued small price declines are anticipated as the market responds to the growing imbalance between elevated inventory levels and constrained buyer confidence. As the peak spring buying season winds down, intensifying seller incentives are expected to place additional downward pressure on home values, which, in turn, may attract demand from cautious buyers who have been waiting for more favorable prices.
- June’s labor and inflation data underscore a resilient, slower job market but also reveal inflationary pressure from tariff pass-through that has re-emerged since May, supporting expectations that near-term mortgage rates will remain stable yet elevated, offering little mortgage relief to homebuyers.
- Presently, sales are projected to increase 2% to 3% at present rates through 2026. The market may become more acclimated to higher rates with sales picking up in May. However, should rates drop below 6%, sales would increase dramatically, and prices would rise as well. Obviously, the opposite is true if rates exceed 7%.
RENTAL MARKET OUTLOOK
Rents in major Texas metros remain under pressure, generally declining or stabilizing, driven by a historic apartment construction boom and an influx of new housing supply. While renters have more negotiating power than they’ve had in years—with many landlords offering concessions like free weeks—the trajectory varies significantly by metro. Because supply has risen dramatically and vacancy rates sit in the double digits, rents are actively dropping across major Texas metros, with widespread move-in concessions.
- Austin – Austin is undergoing the most significant rental correction in the U.S. Following a massive apartment-building boom, metro-wide median rents have dropped over the past year (down roughly 5% to 6%) and are more than 20% below their 2022 pandemic peaks. Renters looking for deals—and concessions like 8-11 weeks of free rent—are finding significant leverage.
- Dallas-Fort Worth -The DFW area has recently commanded some of the highest average rents in the state, eclipsing Austin’s top spot. However, the metro is still seeing year-over-year rent declines. The influx of new multi-family developments is outpacing demand, pushing prices downward to offer renters near-term relief.
- Houston – Houston continues to experience rent decreases as high vacancy rates and new supply ease market tightness. Rents have seen steady year-over-year declines (down 2-3%), pushing median asking prices to more affordable levels. Suburbs like The Woodlands, however, have seen localized spikes due to localized high demand.
- San Antonio – San Antonio remains one of the more stable and affordable major metros in Texas. While still seeing mild rent declines year-over-year (around 2% to 3%), the market hasn’t seen the intense boom-and-bust cycles that hit Austin. The city features a softer rental market, but without the extreme oversupply seen elsewhere.
Compared to the rest of the nation/globe, Texas continues to be the place to be.
If you have any questions or concerns, please get in touch with your local Independent Title Business Development Representative to connect.
MS
