5 Texas Housing Markets at High Risk of a Home Price Decline by 2026

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After a period of rapid expansion, the Texas housing market is showing signs of a significant shift. If you’re an international real estate investor or a homeowner in the Lone Star State, you might be wondering about the future direction of home prices. Recent forecasts from Zillow suggest that specific areas within Texas are indeed poised for notable price reductions.

The data indicates that 5 Texas Housing Markets are projected to experience double-digit price declines by early 2026. These include Pecos, Big Spring, Alice, Raymondville, and Sweetwater, with drops expected to exceed 10% by March 2026. This isn’t a broad warning for the entire state, but it’s a crucial insight for those involved in these particular housing markets.

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Key Takeaways: Texas Housing Market Shifts

• Targeted Declines: Zillow forecasts double-digit home price drops (over 10%) in five specific Texas MSAs by March 2026: Pecos, Big Spring, Alice, Raymondville, and Sweetwater.

• Statewide Cooling: The average Texas home value has already decreased by 1.4% over the past year, signaling a broader market cooldown.

• Buyer Leverage: A significant majority of homes (65.1%) are selling below asking price, indicating increased buyer power.

• Driving Factors: Projected declines are linked to economic specialization (e.g., oil and gas), population changes, supply/demand imbalances, interest rate sensitivity, and a market “normalization.”

• Investor Caution: Investing in these declining markets carries heightened risk, requiring deep local insight and careful due diligence.

Related: The Best U.S. Real Estate Markets to Buy Rental Property in 2025

The Broader Texas Housing Market Overview

Before examining the specific areas at risk, it’s helpful to understand the current statewide picture in Texas. As of July 2nd, 2025, the average home value across Texas is approximately $306,581. This figure represents a 1.9% decrease over the last year, suggesting that the market has already begun to cool from its previous peak.

The time it takes for homes to go under contract (pending) averages around 30 days. Interestingly, only 16% of sales are closing above the initial list price, while a substantial 62.7% are selling for less than the asking price. This data strongly indicates that buyers are gaining more negotiation power, and sellers are needing to adjust their expectations to current market realities. The Texas housing market is clearly in a period of transition.

Related: The Best U.S. Real Estate Markets to Invest for Non-Residents and Foreign Nationals

5 Texas Areas Projected for Double-Digit Price Declines

Zillow, a prominent real estate data provider, regularly analyzes market trends to forecast home value movements. Their most recent projections highlight five specific Metropolitan Statistical Areas (MSAs) in Texas. These are generally smaller communities that tend to be more susceptible to economic fluctuations compared to larger metropolitan areas.

Here’s a breakdown of Zillow’s projections for these areas:

Zillow’s Projected Home Price Changes by March 31, 2026

As the table shows, all five of these areas are forecast to experience price declines exceeding 10% by early 2026. Pecos, Texas, is projected to see the most significant drop, with a potential 12.7% decline. This is a considerable forecast that warrants careful consideration for anyone living in, owning property in, or planning to buy in these regions.

Related: The Best U.S. Real Estate Markets for First Time Investors

Why These Areas? Understanding the Dynamics

It’s natural to question why these specific Texas communities are identified as high-risk. From extensive experience observing housing trends, several common factors often contribute to such projections, particularly in smaller markets.

Pecos, TX (Projected Decline: -12.7%)

• Location & Economy: Situated in West Texas, Pecos’s economy is heavily reliant on the oil and gas industry. While high oil prices can lead to boom periods, a slowdown in the energy sector can quickly impact employment and weaken housing demand. This “boom-and-bust” cycle is a recurring theme in West Texas.

• Implication: The significant projected decline suggests an anticipated softening in the energy sector or a correction following a previous oil-fuelled price surge. For investors who purchased at a recent peak, this could present challenges.

Big Spring, TX (Projected Decline: -11.4%)

• Location & Economy: Also located in West Texas, Big Spring shares strong economic ties to the oil industry and serves as a regional hub for agriculture.

• Implication: Its reliance on a dominant industry makes it vulnerable to external market forces. If local job growth tied to the energy sector falters, the housing market often follows. This forecast may also reflect a market correcting after an unsustainable buying frenzy.

Alice, TX (Projected Decline: -11.3%)

• Location & Economy: Found in South Texas, Alice’s economy has historically been supported by the oil and gas industry, agriculture, and government jobs (including border patrol presence in the wider area).

• Implication: A double-digit decline here suggests a potential slowdown across multiple economic drivers or possibly an oversupply of housing relative to current demand. While South Texas markets can sometimes be more insulated, they are not immune to broader economic shifts.

Raymondville, TX (Projected Decline: -11.2%)

• Location & Economy: Located in the Rio Grande Valley in deep South Texas, Raymondville’s economy primarily revolves around agriculture, services, and some light manufacturing. As a smaller community, its economic health is closely tied to agricultural cycles and regional economic stability.

• Implication: Housing markets in smaller, non-metropolitan areas like Raymondville are highly sensitive to local employment conditions. A downturn in agricultural output or reduced disposable income can rapidly cool housing demand. This forecast might also point to affordability challenges, especially when combined with higher interest rates, even for lower-priced homes.

Sweetwater, TX (Projected Decline: -10.6%)

• Location & Economy: Situated in West Central Texas, Sweetwater is historically known for gypsum production and is increasingly recognized for wind energy. It also has roots in cotton and cattle industries.

• Implication: Despite the positive diversification into wind energy, the housing market could be undergoing a correction from previous highs or feeling the effects of a broader economic slowdown. Even with new industries, smaller towns can experience price volatility, potentially due to recent home construction or investor activity outpacing sustainable local demand.

Related: U.S. Real Estate Market Forecast and Expert Predictions for the Next 5 Years

Understanding the “Why”: Factors Driving Potential Declines

While Zillow uses sophisticated algorithms for its forecasts, from a practical perspective, several common reasons often explain why smaller MSAs like these might experience steeper price corrections:

• Economic Specialization: Many of these towns have economies heavily concentrated in one or two industries, particularly oil and gas. This lack of diversification makes them more vulnerable to downturns in that key sector.

• Population Fluctuations: Smaller communities can experience more dramatic swings in population. If jobs in a primary industry decline, workers may relocate, reducing housing demand and putting downward pressure on prices.

• Supply and Demand Imbalances: A surge in new home construction, perhaps during a boom, can lead to an oversupply if demand doesn’t keep pace. In smaller markets, even a modest number of excess homes can significantly shift the balance.

• Interest Rate Sensitivity: While rising interest rates affect all markets, their impact on affordability can be more severe in areas where incomes may not be increasing as rapidly. When borrowing costs become too high, potential buyers are priced out, leading to reduced demand and falling prices.

• The “Normalization” Effect: The real estate market experienced an unprecedented surge in prices over the past few years. It’s plausible that these smaller markets saw unsustainable growth, and the current projections represent a correction back to more historically typical price levels or growth rates. Markets cannot sustain upward trajectories indefinitely; a natural recalibration often occurs.

Related: U.S. Mortgage Rate Forecast and Expert Predictions 2026, 2027 and 2028

What This Forecast Means for You

Whether you are a potential buyer, an existing homeowner, or a real estate investor in these specific areas, this forecast warrants careful attention.

For Potential Homebuyers:

• Opportunity Knocks? A declining market can present opportunities for lower prices and potentially more negotiating power. Homes that were previously out of reach might now be more affordable.

• Patience Could Pay Off: If Zillow’s timeline is accurate, prices might continue to soften. Waiting could lead to a better deal.

• Catching a Falling Knife: Attempting to time the absolute bottom of a market is extremely difficult. Buying in a declining market means your property’s value could still drop further after your purchase. It’s crucial to consider long-term goals and buy for fundamental reasons (e.g., personal use, long-term rental strategy) rather than purely speculative gains.

• Due Diligence is Key: Thoroughly research the local job market, understand the reasons behind falling prices, and always get a comprehensive home inspection.

For Home Sellers:

• Adjust Expectations: If you plan to sell in these areas, it’s important to be realistic about your asking price. The era of multiple, over-asking offers is likely over for now.

• Price Competitively: Work closely with a local real estate agent who has a clear understanding of current market conditions. Overpricing your home in a declining market can lead to it sitting on the market for an extended period and ultimately selling for less.

• Presentation Matters More: With increased competition and potentially fewer buyers, ensuring your home is well-presented (clean, decluttered, good curb appeal) is more critical than ever.

• Prepare for Longer Listing Times: Be ready for your home to take longer to sell than it might have during a booming market.

For Current Homeowners (Not Selling):

• Paper Value vs. Real Life: A decline in your home’s estimated value is typically a “paper loss” unless you need to sell or refinance immediately. If your home is comfortable and your mortgage is manageable, these market fluctuations are a normal part of long-term homeownership.

• Focus on a Stable Foundation: The most important aspect is your personal financial security and whether your housing payments are comfortable. Market ups and downs are less stressful when your personal finances are in order.

For Real Estate Investors:

• Proceed with Caution: Investing in a declining market inherently carries higher risk. While lower acquisition prices can be tempting, you must be confident in the market’s eventual recovery and the stability or growth of rental demand (if your strategy is buy-to-rent).

• Deep Local Knowledge Required: General investment strategies are rarely effective in highly localized, shifting markets. Success here would likely require an exceptional level of local insight and on-the-ground understanding.

Related: U.S. Mortgage Rates for Foreign Nationals and Non- Residents: Your Essential Guide

A Word on Forecasts and the Bigger Texas Picture

It is crucial to remember that Zillow’s numbers are forecasts, not guarantees. They are based on current data and trends, but market conditions can change rapidly. Economic shifts, local developments, and unforeseen global events can always alter a town’s trajectory.

Furthermore, and this point is critical: these five MSAs do not represent the entire Texas housing market. Texas is an enormous and diverse state. The market dynamics in Pecos, for example, are vastly different from those in major metropolitan areas like Austin, Dallas-Fort Worth, Houston, or San Antonio. While these larger metros are also experiencing a slowdown and price moderation compared to the intense activity of 2021-2022, they generally benefit from more diversified economies and different demand drivers. A double-digit decline in a major metro would be a much larger story with far broader implications.

What this data primarily reflects are hyper-local market corrections. These smaller areas, often more closely tied to specific industries or prone to sharper boom-bust cycles, are adjusting more dramatically than the larger, more economically resilient hubs.

Related: U.S. House Price Gains and Losses Over the Past 30 Years

Factors to Watch Moving Forward

To assess whether these projections hold true, or if the situation evolves, several key indicators for these specific areas and for Texas generally should be monitored:

• Oil and Gas Prices/Activity: This is paramount for regions like Pecos and Big Spring.
• Local Job Reports: Are these areas experiencing job gains or losses? Which sectors are expanding or contracting?

• Inventory Levels: Is the number of homes available for sale increasing rapidly? A significant rise usually signals downward pressure on prices.

• Days on Market: How long are properties taking to sell? If this number consistently increases, it indicates greater buyer power.

• Mortgage Interest Rates: National rate trends will continue to influence affordability across all markets.

• Migration Patterns: Are people moving into or out of these specific Texas towns?

Related: Is it Better to Rent or Buy a Home in the USA in 2025?

Conclusion: Stay Informed, Stay Local

The Zillow forecast is a significant piece of information, particularly for those directly involved in Pecos, Big Spring, Alice, Raymondville, and Sweetwater. It underscores the fact that real estate markets can behave very differently, even within the same state.

My advice for international real estate investors and anyone considering these areas is to treat this forecast as a valuable data point. Conduct deeper research, engage with local real estate professionals who possess on-the-ground experience, and carefully consider your own financial situation and investment goals. The Texas real estate landscape is dynamic, and staying informed and adaptable is your best strategy for navigating its complexities.

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Frequently Asked Questions (FAQs) About Texas Housing Market Risks for Investors

• Q1: What is the main finding of the Zillow forecast for Texas housing markets? A1: Zillow forecasts that five specific Texas housing markets (Pecos, Big Spring, Alice, Raymondville, and Sweetwater) are at high risk of experiencing double-digit home price declines (over 10%) by early 2026.

• Q2: What is the current average home value in Texas as of March 2025? A2: As of March 31, 2025, the average Texas home value is approximately $307,629, which is down 1.4% over the past year.

• Q3: What are the five Texas housing markets identified by Zillow as high risk for price declines? A3: The five markets are Pecos, Big Spring, Alice, Raymondville, and Sweetwater.

• Q4: Why are these specific Texas markets at higher risk of home price declines? A4: These markets are at higher risk due to factors like economic specialization (heavy reliance on industries like oil and gas), population fluctuations, supply and demand imbalances, sensitivity to interest rate changes, and a “normalization” effect after unsustainable price surges.

• Q5: How does economic specialization impact a housing market’s risk? A5: When a local economy heavily relies on one or two industries (e.g., oil and gas), it lacks diversification, making it more vulnerable. A downturn in that key industry can directly lead to job losses, reduced housing demand, and falling home prices.

• Q6: What does the “normalization” effect mean in the context of housing prices? A6: The “normalization” effect refers to a market correction where prices, after an unsustainable period of rapid growth (like during the recent real estate boom), adjust back to more historically typical and sustainable levels or growth rates.

• Q7: What should potential homebuyers consider when looking at these high-risk Texas markets? A7: Homebuyers might find opportunities for lower prices, but they should be cautious about “catching a falling knife” (prices dipping further after purchase). Thorough due diligence on the local job market and home inspections are crucial.

• Q8: What advice is given to home sellers in these high-risk Texas markets? A8: Sellers should adjust their price expectations, price competitively with the help of a local agent, ensure their home is well-presented, and be prepared for potentially longer listing times.

• Q9: How do these projected declines affect current homeowners who are not planning to sell? A9: For homeowners not selling, a decline in value is a “paper loss” unless they need to sell or refinance. The key is to focus on personal financial stability and manageable mortgage payments, as market fluctuations are part of long-term homeownership.

• Q10: Is it advisable for real estate investors to buy properties in these declining Texas markets? A10: Investing in a declining market carries high risk. While lower acquisition prices can be tempting, it requires deep local knowledge and confidence in the market’s eventual recovery and stable rental demand. Investors should proceed with extreme caution.

• Q11: Do these Zillow forecasts apply to the entire Texas housing market? A11: No, these forecasts specifically apply to the five smaller MSAs identified (Pecos, Big Spring, Alice, Raymondville, Sweetwater). The broader Texas market, including major metros like Austin or Houston, has more diversified economies and different dynamics, though they are also experiencing moderation.

• Q12: What key indicators should be monitored to track these Texas housing markets moving forward? A12: Key indicators include oil and gas prices/activity (for energy-dependent areas), local job reports, inventory levels (homes for sale), days on market, national mortgage interest rates, and migration patterns (people moving in or out).

• Q13: What is the average time homes are going pending in Texas as of March 2025? A13: As of March 31, 2025, homes in Texas are going pending in about 33 days on average.

• Q14: What percentage of Texas homes are selling below asking price in the current market? A14: A significant 65.1% of homes in Texas are currently selling for under the asking price.

• Q15: How does interest rate sensitivity affect smaller housing markets? A15: While higher interest rates impact all markets, they can hit affordability harder in smaller areas where incomes might not be rising as quickly. This can lead to potential buyers being priced out, reducing demand and causing prices to fall.