Texas Is the Fastest-Growing State in the U.S.—and Now the Race Is On To Build More Homes

They say that everything is bigger in Texas, but there’s an important exception that’s key to improving housing affordability in the state: new homes. 

Faced with a population explosion driven by newcomers, the Texas housing market has grappled to keep pace with demand in recent years, with homebuilders racing to fill the void.

Last year, Texas was the No. 1 state for permitted housing units, accounting for 15% of the national total, well above the state’s 9% share of the U.S. population.

Perhaps more importantly, those homes are growing smaller and more affordable, with the median square footage of new homes in Texas down 5.3% last year from 2020, a sharper decline than the 3.6% reduction seen nationwide.

Consequently, in the past two years, the share of new builds on the Texas market priced below $350,000 has increased, while the shares of new builds priced from $350,000 to $750,000 and from $750,000 to $2 million have both fallen.

That’s according to the Realtor.com® economic research team’s new report on the Texas real estate market, released on Thursday in conjunction with the announcement that Realtor.com is relocating its headquarters from California to Austin, TX.

The headquarters move follows a rapid influx of businesses and new residents moving to Texas in recent years, many of them also arriving from California in search of more affordable housing, a strong labor market, and relief from wildfires that are growing more frequent and deadly.

Rapid growth has created many opportunities for the Texas economy to thrive, but it has also presented challenges for the state’s housing market.

“The state has grown rapidly in the last several years as people from across the country and across the world have seen what Texas has to offer,” says Realtor.com Chief Economist Danielle Hale. 

“Already-scarce housing inventory from years of under-building was flooded with cash offers, and listing prices and rents soared,” she adds. “Texas has responded by building more and smaller homes to meet demand, helping the market settle and housing inventory climb back to pre-pandemic levels ahead of the nationwide recovery.”

What’s behind Texas’ population boom

Over the past decade, Texas has added more residents to its population base than any other state, growing by nearly 4 million residents from 2013 to 2023.

Right now, Texas is second, only to California, as the most populous state with an estimated population of just under 31 million in 2024. California’s population lead is sizable, with nearly 27% more residents than Texas in 2024.

But, population projections suggest the Texas’ growth trend will continue, propelling it to become the largest state by population in 2045, when it could surpass California with a population of 42 million.

Realtor.com’s economists noted that the shift in ranking in 2045 is due to a combination of population growth in Texas as well as a population loss projected in California.

In 2019, roughly 1 in 5 Texas home shoppers on Realtor.com was from out of state. This share picked up drastically during the pandemic, and by April 2023, roughly 1 in 3 viewers of Texas properties was from out of state. 

Out-of-state viewership has since fallen, but it remained above pre-pandemic levels at 30%—more than 1 in 4 home shoppers—in 2024.

The two largest sources of immigration to Texas are international migration and relocation from California, U.S. Census Bureau data shows.

A Realtor.com analysis of the census survey data shows that Californians are most likely to say they chose to move to Texas for housing, climate, and job-related reasons.

The analysis shows that people who move from California to Texas are 56% more likely to move for cheaper housing than the typical person who moved out of state. 

The second-highest odds-ratio of California to Texas movers was for a change of climate (37%), followed by a new job or job transfer (36%), a desire to own a home and not rent (31%), and a job loss or a job search (10%). 

While it’s unclear exactly what climate reasons the survey respondents had in mind, at least some of these climate-related moves from California are likely spurred by the devastating wildfires that caused tens of billions of dollars in damages in recent years. 

The recent wildfires in Los Angeles County last month are a reminder that these risks have not diminished.

Despite challenges, the Texas housing market is more affordable than the U.S. overall

Despite rapid increases during the pandemic, the median-priced home in Texas has remained less than the national median from 2018 through the latest data period. 

After climbing rapidly during the COVID-19 pandemic and peaking in June 2022, home prices in Texas have settled slightly as easing demand and increased inventory relieved some of the upward price pressure. 

As of December 2024, the median list price in Texas was $360,000, roughly $40,000 below the national median. 

Meanwhile, the state’s median household income lags the national level by less than $5,000. 

On a price-per-square-foot basis, homes in Texas have only increased in their affordability relative to the national median each year since 2016. 

In 2024, the typical Texas home was listed for 17.6% lower per square foot than the typical home nationally. 

Although home prices have fallen recently in Texas, the median list price per square foot has only eased slightly, suggesting more homes with smaller floor plans are for sale in the state, helping to pull down the overall median.

Texas is building more affordable homes, but could still use more

Texas has been a national leader in building more affordable homes in recent years, but there is still more work to be done.

Since the pandemic, the share of new homes for sale priced below $350,000 has climbed, bolstered by strong construction activity.

Although Texas offers considerable inventory in lower price tiers, the price distribution of for-sale homes does not match well with the state’s income distribution, according to the new Realtor.com report. 

Roughly 23% of Texans make less than $35,000 per year, but only about 2% of for-sale homes are affordable at this income level. 

Similarly, 51% of Texans make less than $75,000 per year, but just 17% of for-sale inventory is affordable at this income level. 

Even for 80th percentile earners, making up to $150,000 per year, just 66% of for-sale inventory is affordable. 

Those figures highlight the need for an even greater push to build more lower-priced housing options. As well, falling mortgage rates could help unlock more affordable inventory availability for low- and middle-income Texans.

Realtor.com’s economists also note that Texas must lead not only in the quantity of homes built, but also in the resilience of the homes against flood, wind, and heat risks that are a factor for trillions of dollars of Texas homes.