As Texas grapples with an increasing interest rate environment, the housing market is showing signs of strain, particularly in major cities like Austin and Dallas.

In June 2026, the average interest rate for a 30-year fixed mortgage reached 6.75%, a notable increase from the 5.5% seen just a year prior. According to the Texas Real Estate Research Center at Texas A&M University, this surge in borrowing costs has led to a 15% decline in home sales across the state compared to the same period last year.

“Consumers are feeling the pinch of higher monthly payments, which is causing many potential buyers to rethink their plans,” said Dr. Jim Gaines, chief economist at the Texas Real Estate Research Center. “We’re witnessing a significant cooling off in a market that just a year ago was characterized by fierce bidding wars and escalating prices.”

In Austin, the median home price has dropped to approximately $575,000, down from its peak of $610,000 in early 2025. This decline marks the first time in three years that Austin has experienced a year-over-year decrease in home prices, making it a bellwether for the broader Texas market.

Meanwhile, Dallas-Fort Worth is not immune to the trend. The area has seen a significant shift in buyer sentiment, causing home prices to stagnate. According to data from the North Texas Real Estate Information Systems, the average home price in the DFW area is currently hovering around $425,000, which is flat compared to last year.

The rising interest rates have also affected the rental market. As potential homebuyers remain on the sidelines, many are opting to rent instead, pushing rental prices up. The average rent for a one-bedroom apartment in Austin has surged to $2,200, a significant increase of 8% year-over-year.

Experts suggest that the shift in the housing market could provide opportunities for investors and first-time homebuyers. “Those who can afford to buy now may find themselves in a better position to negotiate,” said Michael McMahon, a local real estate agent in Austin.

With uncertainty looming over the Federal Reserve's monetary policy, the Texas housing market remains in a state of flux, and industry stakeholders are closely monitoring how these trends will unfold in the latter half of 2026.