Mary's Market Watch: Q4 2025
- Mary McLean
- 7 hours ago
- 8 min read
The Broad Strokes
Residential real estate wrapped up 2025 with record-high home prices and an historically low sales volume. These trends, nationally and locally, speak to changes in the marketplace: residential real estate is becoming more balanced.
As a reminder, we had a pandemic-era housing boom and have been in a seller’s market for more than 10 years now. Mortgage rates are starting to come down, but have been relatively high, i.e. above 6%, but historically low, i.e. below 10%. For perspective, in the 1970s, mortgage rates were over 20%.
It takes a minute for the market to respond and react. I like to think of this as the ‘lag effect’, the time between when we hear about an event in the news and when it is fully felt in the market and our wallets. So, it may take a bit of time for lower interest rates to affect mortgage rates.
For those of you waiting to buy a property, your time is coming—mortgage rates continue to decline as home price growth slows. These two markers solidly point toward movement to a buyer’s market.
2026 Forecast
This year is anticipated to see modest declines in mortgage rates, greater stability in home prices with modest appreciation and generally a more favorable market for buyers. This should buoy sales, quash some of the buyer reticence in the market as well as entice first-time home buyers into the market. Builders should see an improvement in the sales of new-home construction. While inventory has generally been rising, it is important that it keep pace as more buyers enter the market.
A Deep Dive into the Data
U.S. Real Estate Market
The U.S. economy remains a top performer on the world stage. The stock market has achieved record highs. Unemployment remains low at 4.4% in December 2025 even though a few states are starting to show net job losses. The Gross Domestic Product (GDP), which is the total dollar value of everything a country produces, grew by an impressive 4.4% in Q3 2025. There are two major negatives: inflation, which is higher than ideal, and uncertainty with respect to policy, trade and geopolitics. The good news is that the home sales market is the strongest it has been in three years.
Interest Rates. In big news, the Federal Reserve (Fed) did not cut interest rates on January 28, 2026, and a new Federal Reserve Chair has been nominated by President Trump to replace the current Fed Chair Jerome Powell when his term expires in May. The appointment of Kevin Warsh by Trump requires a Senate confirmation. A former Federal Reserve official, graduate of Harvard Law School and a former VP of Morgan Stanley, Warsh is a proponent of lower interest rates, which Trump favors. As of January 26, 2026, mortgage rates, which are affected by interest rates, stand at 6.16% for a 30-year fixed mortgage (Source: “Today’s Mortgage Rates,” Mortgage News Daily, January 31, 2026).
Home Sales, Price and Inventory. Sales of existing homes increased by 1.4% from December 2024 to December 2025, while the number of homes on the market increased by 3.5% year-over-year. The median sales price increased by 0.4% to $405,400 year-over-year in December 2025. The average months’ supply is 3.3 in December 2025, down from 4.2 in November 2025 and slightly up from 3.2 in December 2024. Housing inventory was down by a notable 18.1% from November. A balanced market has 6.0 months of inventory. (Source: “NAR Existing-Home Sales Report Shows 5.1% Increase in December,” National Association of Realtors, January 14, 2026.)
The Texas Economy
The Texas economy remains a national leader in growth evidenced by corporate relocations and population growth, including domestic migration to Texas and natural growth (new residents added through births). While an influx of more residents typically encourages real estate demand, high mortgage rates and high property taxes make affordability a major issue for Texans, shifting the market from a frantic seller's pace to a more balanced, buyer-friendly environment with greater inventory.
Population growth. While population growth in Texas definitely slowed last year, the State of Texas still added more residents in 2025 than any other state. This deceleration is due to the fact fewer immigrants are moving to Texas and the U.S. as fewer people in the country decided to call Texas home (Source: Fechter, Joshua, “Census: Texas led U.S. in population growth in 2025, but immigration slowed,“ The Texas Tribune, January 27, 2026).
Job growth. Texas remains a very business-friendly environment, and corporate relocations to the state still abound; however, there has been a recent falloff in job growth that has naturally impacted in-migration to Texas. According to the Federal Reserve Bank of Dallas, the Texas economy is experiencing a mild slowdown as jobs approximated near-zero growth last year. However, the unemployment rate of 4.3% is still less than the national average of 4.4% as of December 2025. (Source: “Texas Employment Forecast,” Federal Reserve Bank of Texas, January 9, 2026.)
In Texas, the median home price increased ever slightly as listings experienced a major decline since September 2025. Overall, 2025 saw a decline in home prices with an appreciable increase in listings, closed sales and inventory.
Median Home Price. At $330,849, the median home price in Texas decreased by 2.7% from December 2024 to December 2025. This represents a slight increase of $849 from $330,000 at the end of last Quarter (September 2025).
Active Listings. This figure increased by 14.2% to 128,677 in December 2025 year-over-year but represents a notable decrease of over 24,000 listings since September 2025.
Closed Sales. There were 28,070 closed sales in December 2025, which is up by 4.8% from last year, but approximates the number of closed sales at 28,268 in September 2025.
Inventory. Months of inventory averaged 4.6 in December 2025, which is an increase from 4.1 months in December 2024. September 2025 saw an average months of inventory of 5.5. As a reminder, a balanced market between buyers and sellers is 6.0 months.
Days on Market. December 2025 averaged 109 days on market, which is 6 days more than in December 2024. Days on market averaged 100 days last September.
(Source: “Dec. 2025 Texas Housing Report,” Metrotex, January 2026.)
DFW Residential Real Estate Sales
By the end of 2025, the DFW residential real estate market shifted toward a more balanced market, as it became more buyer-friendly. Specifically, there was an increase in inventory with rising home prices starting to moderate. While 2025 saw a surge in luxury ($1M+) home sales, with DFW leading Texas in this segment, the velocity of sales slowed, as homes remained on the market longer.
Median Home Price. At $375,000, the median home price in DFW decreased by 6.3% from December 2024 to December 2025. It was $389,715 in September 2025.
Active Listings. This figure increased by 9.0% to 27,041 in December 2025 year-over-year. Inventory decreased by 23.75% and 8,424 from 35,465 since September 2025. Some but not all of this can be attributed to seasonality, since residential real estate sales typically slow during the fall.
Closed Sales. There were 7,704 closed sales in December 2025, up by 3.0% year-over-year. This represents a slight increase from 7,666 in September 2025.
Inventory. Months of inventory averaged 3.5 in December 2025, which is an increase from December 2024 when there were 3.2 months of inventory, but is down from 4.6 months in September 2025. Again, a balanced market between buyers and sellers is 6.0 months.
Days on Market. December 2025 had 103 days on market, which is 5 days more than December 2024 and 8 more days than September 2025.
(Source: “Dec. 2025 DFW Housing Report,” Metrotex, January 2026.)
Commercial and Multifamily Market
At the end of 2025, the U.S. commercial real estate market showed signs of recovery, increasing property values and greater transaction activity. While the multifamily sector grappled with a significant number of new deliveries and almost net-zero rent growth, sales volume grew by 9%, indicating relatively strong investor demand.
Leasing in the office segment reached a post-pandemic high in Q4, with annual leasing growing 5.2% year-over-year. The industrial market saw supply outpace demand, as retail performed well with a low vacancy rate at 4.3%, the lowest of all segments.
DFW continues to attract developers who are banking on population growth as well as investors who see value in both industrial and high-end office assets. The area market is characterized by a "flight-to-quality" in office, a rebalancing of industrial supply, and rising retail rents. The DFW multifamily market is still working through excess supply with a high vacancy rate and slight negative rent growth, but new deliveries are downsizing to a multi-year low of 30,684 units as the market becomes more balanced. (Source: “Dallas-Fort Worth, TX Multifamily Market Report Q4 2025,” Matthews Real Estate Investment Services, December 16, 2025.)
New-Home Construction
In 2025, U.S. new-home construction focused on building more affordable, slightly smaller homes to address a critical housing shortage, with total starts projected to remain active despite high material and labor costs. This year may see another year of declines in new-home starts. Interestingly, Texas is forecasted to continue to be a leader in new-home starts.
I cannot emphasize enough the importance of the role oversupply of new homes has played in creating challenges for home builders last year. This is a stark contrast to the post-COVID boom when demand outpaced supply. While in-migration to DFW continues to work in the favor of builders, job growth in DFW has cooled a bit. And, of course, inflation is a factor no one can ignore.
As a result, builders in DFW started significantly fewer new homes during 2025, which translated to a 12% decrease and 41,222 new-home starts, according to Residential Strategies Inc. Correspondingly, new-home closings have also declined by 5.5% from 2024. (Source: Wooten, Nick, “Dallas-Fort Worth homebuilders saw ‘weak’ demand in 2025. Will 2026 be different?” Dallas Morning News, January 13, 2026.)
Food for Thought
Homeownership is the cornerstone of the American Dream. It serves as a primary, accessible vehicle for middle-class generational wealth, utilizing tax advantages and equity growth. In a recent survey by Realtor.com®, three out of four Americans believe that homeownership is part of the American Dream (Source: Jones, Hannah, “Three-Quarters of Americans View Homeownership as Part of the American Dream,” Realtor.com®, January 14, 2026).
Harkening back to the 1700s, the American Dream of homeownership began when European immigrants fled societies where land was reserved for the aristocracy. In the American colonies, land ownership represented personal freedom, a stake in democracy and a break from the "tenant class" system of Europe.
The Homestead Act of 1862 allowed settlers to claim land, cementing land ownership as a core American value. In the early 1900s, homeownership was under 50%, and loans were hard to come by. Then the financial crisis of the 1930s necessitated federal intervention, creating the Federal Housing Administration (FHA) in 1934, which introduced modern, long-term mortgages.
After World War II, the American Dream of building wealth through real estate was solidified with the GI Bill and the introduction of Federal Housing Administration (FHA) loans that made homeownership more accessible. Homeownership rates surged from 44% in 1940 to 61.9% in the 1960s, and then to 65% in the 1970s and 1980s. The 1990s to 2004 saw homeownership spike to a record high of 69.2% in 2004, driven by subprime lending. Since 2008, rates have approximated 65%.
Homeownership is most Americans’ biggest asset, and the statistics bear this out: the typical American homeowner has nearly $400,000 in wealth compared to the average renter who has just over $10,000 in wealth. Through equity building, consistent home price appreciation (averaging 4% annually) and tax advantages, homes act as forced savings vehicles. Interestingly, the rates of homeownership in the U.S. are lower than some of our international counterparts, which are driven by cultural, historical and policy differences, including the rapid privatization of public housing. Global homeownership rates typically range from 60% to 90% (Source: “Home Ownership Rate,” Trading Economics, January 31, 2026).This makes the case that homeownership is important the world over.
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