Introduction

This report delivers a comprehensive, data-driven analysis of Texas’s real estate markets, with a focus on pricing trends, rental yields, cap rates, inventory, migration patterns, regulatory shifts, and the operational realities facing investors. Special attention is given to the four major metro areas—Austin, Dallas–Fort Worth (DFW), Houston, and San Antonio—each of which exhibits unique dynamics and opportunities.

Macroeconomic and Policy Context

Economic growth and labor market

Texas entered 2026 with a moderate but stable economic outlook. The Texas Real Estate Research Center (TRERC) projected state GDP growth in the range of 2.4% to 2.9% for 2026, outpacing the national average of 2% to 2.6%. Payroll employment is forecast to increase by 1.3% to 1.7%, reflecting ongoing job creation in sectors such as energy, healthcare, technology, and logistics. DFW and Houston continue to attract corporate relocations and expansions, while Austin’s tech sector, though cooling from its pandemic-era highs, remains a magnet for high-wage employment.

Interest rates and inflation

The Federal Reserve’s monetary policy has shifted toward gradual easing, with the federal funds rate expected to settle between 3% and 3.5% by year-end 2026. Mortgage rates, while down from their 2023–2024 peaks, remain elevated by historical standards, hovering between 5.9% and 6.3% for 30-year fixed loans. This environment has improved affordability modestly but continues to constrain some segments of demand, particularly among first-time buyers. See why high rates are becoming a landlord’s asset .

Regulatory and legislative developments

Several new Texas laws enacted in 2025 and taking effect in 2026 are reshaping the real estate landscape. Key among these is Senate Bill 38 (SB38), which streamlines and clarifies eviction procedures, accelerates court timelines, and modernizes processes for handling squatters and unauthorized occupants. Additional legislation encourages higher-density development and the conversion of nonresidential properties to residential use, aiming to address housing affordability and supply constraints, especially in urban cores. At the same time, stricter enforcement of federal immigration policies is tightening the construction labor pool, potentially impacting project timelines and costs.

Statewide Market Performance: Q1 2026 vs. 2025 Projections

The Texas multifamily market slightly outperformed 2025 projections in Q1 2026. Net absorption exceeded new deliveries, compressing vacancy by 10 basis points. Cap rates remained stable, and effective rent growth improved modestly. Institutional and private equity investment activity increased, buoyed by greater capital availability and easing financing costs.

Texas statewide multifamily market: Q1 2026 actuals vs. 2025 projections

Pricing Trends and Home Price Indices

Statewide and metro-level home prices

Texas’s median home price in Q1 2026 is approximately $334,000, reflecting a modest 1.3% year-over-year increase from 2025’s $330,000. This aligns closely with projections that anticipated a period of stabilization following the rapid appreciation of the pandemic years. The statewide house price index shows a plateauing trend, with only slight movement expected into 2026.

Metro-level median home prices and inventory

Austin: Median prices have declined 2–6% year-over-year, with Q1 2026 medians ranging from $425,000 to $489,000, reflecting ongoing correction from prior overbuilding.

DFW: Median prices are stable to slightly down, with Dallas at approximately $364,000 and Tarrant County at about $347,000, as the market finds its floor after a cyclical reset.

Houston: Median prices are flat to slightly down, at around $335,000, with some submarkets showing resilience due to strong job and population growth.

San Antonio: Median prices are flat, at roughly $309,000–$315,000, with affordability and steady demand supporting stability.

Median home prices and inventory by metro (Q1 2026)

Rental Yields, Effective Rents, and Cap Rates

Rental yields and effective rents

Statewide, average single-family rents are forecast to be $2,100–$2,200 per month in 2026, with multifamily effective rents showing modest growth after a period of softness. The multifamily sector, after absorbing a wave of new supply in 2024–2025, is seeing rent growth return to positive territory in most metros.

Austin: Effective rents are stabilizing after a 10-quarter decline, with Q1 2026 averages near $1,407–$1,500 and projected rent growth of 1.6% for the year.

DFW: Average effective rents are $1,419–$1,528, with rent growth rebounding to 2.8–4.2% annually.

Houston: Effective rents are $1,935 for Class A, with 2.6–3.2% year-over-year growth.

San Antonio: Effective rents are $1,493 for Class A, with 2.4–3.1% year-over-year growth.

Gross rental yields: In value-driven submarkets such as West San Antonio, Southtown, and Harlandale, yields remain attractive, ranging from 6% to 8%.

Cap rates and valuation trends

Cap rates for Texas multifamily assets have stabilized after widening 100–200 basis points from 2021–2022 troughs. As of Q1 2026:

• Class A (Core/Core-Plus): 5.18%–5.80% in major metros.
• Class B: Mid-6% to around 7%.
• Class C/Workforce: High-6% to 7%+.
• Value-add acquisitions: 6.77%+.

Cap rates are generally higher in Houston and San Antonio, attracting yield-focused investors, while Austin and DFW see tighter spreads due to strong institutional demand.

Inventory Levels and New Construction Pipeline

Statewide and metro inventory trends

Texas’s housing inventory has normalized from the severe shortages of 2021–2023. As of Q1 2026, statewide months of inventory stand at approximately 2.8–3.5, up from sub-two-month levels in 2024. This shift reflects both increased new construction and a moderation in buyer demand due to higher interest rates.

Austin: Inventory is elevated at 3.8–4.5 months, with a 35% year-over-year increase in active listings as the market digests a large pipeline of new multifamily and single-family units.

DFW: Inventory is tighter at 2.6–3.4 months, supported by robust job and population growth.

Houston: Inventory is at 3.1–4.5 months, with new construction permits up 12% year-over-year.

San Antonio: Inventory is the tightest among major metros at 2.3–4.2 months, reflecting steady demand and limited new supply.

New construction pipeline

The multifamily construction pipeline has contracted sharply. Statewide, fewer than 35,000 new apartment units are expected to be delivered in 2026, down from 93,000 in 2025. Single-family permits are projected to rise modestly by 1–4%, signaling cautious optimism among builders.

Migration Patterns and Population Flows

Inbound migration and demographic drivers

Texas remains a national leader in net in-migration, with 265,000 new residents arriving from out of state in the past year— an average of 22,000 per month. The majority of newcomers hail from California, Florida, and Colorado, with Gen X and millennials accounting for three-quarters of inbound migration. DFW, Houston, Austin, and San Antonio are the top destinations, each benefiting from job growth, affordability, and lifestyle appeal.

• DFW: Leads the state with over 519,000 new residents in the past year, driven by corporate relocations and a diversified economy.
• Houston: Attracts 376,000 new residents, with strong pull from both in-state and out-of-state movers.
• Austin: Continues to draw talent from across Texas and the nation, though rising housing costs are pushing some demand to surrounding suburbs.
• San Antonio: Adds 159,000 new residents, supported by military, healthcare, and manufacturing sectors.

Suburbanization and demographic shifts

Growth is increasingly concentrated in suburban (one of our five forecasts for 2026) and exurban ring counties around the major metros, reflecting both affordability pressures and lifestyle preferences. The state’s population is also aging, with the 65-and-over cohort projected to reach 22% by 2060, and the Hispanic population continuing to see the most significant numerical growth.

Regulatory and Policy Changes Affecting Investors

Eviction reform: Senate Bill 38 (SB38)

Effective January 1, 2026, SB38 introduces the most significant overhaul of Texas eviction procedures in decades. Key provisions include streamlined court timelines (trial within 21 days of filing), clarified venue and notice requirements, fast-track summary disposition for non-responsive tenants, and modernized processes for handling squatters and unauthorized occupants. Multifamily operators must update standard operating procedures, staff training, and compliance systems to ensure timely and lawful evictions.

Density and affordability legislation

Recent state laws limit the ability of certain cities to impose minimum lot size and density requirements, encourage conversion of nonresidential properties to residential use, and propose increases to homestead exemptions. These measures are designed to stimulate housing supply and affordability, particularly in high-demand urban areas.

Insurance and Natural Hazard Risks

Rising insurance costs

Insurance costs for multifamily and single-family properties have more than doubled since 2020, driven by catastrophic weather events, construction inflation, and a tightening reinsurance market. Texas faces a growing flood insurance gap, with only 7% of residential properties statewide covered, and premiums rising 35% since 2021. Investors must budget for higher insurance and utility expenses, especially in high-risk markets.

Houston, for example, saw multifamily values drop 11.1% directly due to rising premiums, and coverage rates are below 1% in major inland metros like Dallas, Denton, and Bexar counties.

Operational strategies for mitigating insurance costs

• Infrastructure upgrades: Fire suppression, electrical systems, and other risk-reducing improvements.
• Policy optimization: Bundling policies and shopping coverage annually.
• Higher deductibles: Paired with stronger cash reserves.
• Risk management programs: Maintenance and prevention strategies to reduce claims and preserve NOI.

Private Equity, Institutional Investor Activity, and Capital Markets

Capital markets and lending environment

Government-sponsored agencies (Fannie Mae, Freddie Mac) remain the dominant lenders for multifamily, with lending caps increased by over 20% for 2026, signaling ample liquidity. Multifamily loan rates for large balance loans (over $6 million) start at 5.18% for 5-year fixed terms, with maximum LTVs up to 80%. Banks and life insurance companies have also stepped up market engagement, while CMBS and bridge loans are available for value-add and transitional assets.

Multifamily cap rates and lending metrics (Q1 2026)

Private equity and syndication trends

Private equity and institutional investors have increased activity, particularly in DFW and Houston, where yield profiles remain attractive. Multifamily syndications are focusing on operational efficiency, value-add strategies, and disciplined underwriting.

• Exit cap rates: Underwritten at least 50–100 bps above entry cap rates.
• Taxes: Year-1 taxes underwritten at 100% of purchase price in reappraisal counties.
• Insurance: Modeled at current market quotes with step-ups.
• Economic vacancy: Includes bad debt, concessions, and loss-to-lease.
• Reserves: 3–6 months of OpEx plus debt service, and capex contingencies of 10–15%.

Fundraising for equity strategies remains challenging, but real estate debt funds have gained traction since mid-2023, with more funds targeting opportunistic and value-add acquisitions.

Multifamily Market Performance: Statewide and Metro Deep Dives

Statewide multifamily overview

Texas’s multifamily market in Q1 2026 is characterized by net absorption of +42,000 units outpacing new deliveries, a vacancy rate of 6.2% (down 10 bps year-over-year), effective rent growth of 2.4% year-over-year, and cap rates stable at 5.5%–6.0%. Institutional investment is up 15% year-over-year. With fewer than 35,000 new units expected in 2026 (down from 93,000 in 2025), supply moderation and steady demand are setting the stage for improved fundamentals in the second half of the year.

Austin: Market at an inflection point

Austin’s multifamily market has endured a 10-quarter rent decline, with average asking rents dropping to $1,396 in Q4 2025. However, the market is poised for a turnaround in late 2026 as new deliveries slow and demand rebounds.

• Q1 2026 average effective rent: $1,407–$1,500.
• Occupancy: 89.3%, steady year-over-year.
• Net absorption: Projected at 9,346 units for 2026.
• Construction completions: 5,137 units, down sharply from 17,254 in 2025.
• Class A vacancy: 5.6% (down 30 bps).
• Class A rent: $1,956 (down 1.5% year-over-year).

Investor sentiment is cautiously optimistic, with cap rates in the low-5% range. Recovery will depend on continued job growth, especially in tech-adjacent sectors, and successful absorption of recent supply.

Dallas–Fort Worth: Resilient and reaccelerating

DFW remains the top-ranked U.S. metro for real estate prospects in 2026, supported by strong population and income growth.

• Population growth: 150,000+ net new residents annually.
• Median household income: Approximately $92,000, up 5% year-over-year.
• Multifamily average effective rent: $1,419–$1,528.
• Rent growth: 2.8–4.2% year-over-year.
• Vacancy: 5.5% for Class A (down 30 bps).
• Construction completions: 18,500 units in 2025, with starts down 30% year-over-year.
• Cap rates: Around 5.8% for multifamily.

Absorption outpaced deliveries in Q3 2025, signaling stabilization. Institutional and private equity investors are actively deploying capital, focusing on value-add and workforce housing in high-growth submarkets such as Collin and Denton counties.

Houston: Normalization and opportunity

Houston’s real estate market is moving toward normalization after years of volatility, with improving fundamentals and attractive yields.

• Q1 2026 median home price: Approximately $335,000, flat to -1.5% year-over-year.
• Multifamily Class A rent: $1,935 (up 2.6% year-over-year).
• Vacancy: 6.0% for Class A (up 20 bps).
• Inventory: 3.1–4.5 months, with new construction permits up 12% year-over-year.
• Net absorption: 8,000 jobs in 2026.
• Cap rates: Among the highest in Texas, attracting yield-focused investors.

Houston’s diverse economic base, continued population growth, and improving inventory levels create a compelling environment for both fix-and-flip and buy-and-hold strategies. The rental market remains strong, with average rents up 6.8% year-over-year and projected population growth of 2.1% annually through 2030.

San Antonio: Stability and affordability

San Antonio offers a stable and affordable environment for investors, with strong yields and steady demand.

• Q1 2026 median home price: $309,000–$320,000, flat year-over-year.
• Multifamily Class A rent: $1,493 (up 2.4% year-over-year).
• Vacancy: 6.1% for Class A (down 20 bps).
• Inventory: 2.3–4.2 months, tightest among major metros.
• Rent growth: 3.1% projected for 2026.
• Gross rental yields: 6–8% in value-driven submarkets.

The market benefits from robust job creation in healthcare, logistics, and military sectors, as well as ongoing in-migration from higher-cost metros. Investor interest remains high in Class B and C multifamily assets, where renovation potential and affordability align with renter demand.

Lender and Debt Market Conditions

Lending environment

The lending environment in Q1 2026 is characterized by multifamily loan rates of 5.18%–5.30% for 5–10 year fixed terms on large balance loans, maximum LTVs up to 80% for purchases (75% for refinances), and DSCR requirements of 1.25x–1.35x, with more conservative underwriting for transitional assets. CMBS and bridge loans range from 6.29%–7.54% for 10-year fixed terms, with higher rates for value-add and non-stabilized properties. SBA and USDA loans offer 5.67%–6.50% rates with up to 90% LTV for owner-occupied properties.

Lenders remain selective, favoring strong cash flow, conservative leverage, and experienced sponsors. Many loans originated in 2019–2021 are maturing in 2026 and are resetting at higher rates, requiring borrowers to plan for tighter proceeds or additional equity.

Exit Strategies and Liquidity

Market liquidity and exit options

More than 2.1 million multifamily units were delivered in Texas over the past five years, many by developers with short-term hold or merchant-build strategies. Recently completed properties that have yet to reach stabilization may trade more frequently in 2026, especially if investors are willing to tackle lease-up risk at discounted pricing.

Large primary markets (DFW, Houston, Austin, San Antonio) captured 44% of multifamily properties traded last year, ensuring liquidity for well-located assets. Exit cap rates are being underwritten at least 50–100 bps above entry cap rates, reflecting investor caution in a higher-rate environment.

Operational Strategies for Syndicators and Private Equity

Underwriting and asset management

Disciplined underwriting is paramount in 2026. Investors are modeling conservative rent growth, full expense recognition, and realistic exit assumptions while maintaining robust reserves and multiple take-out paths.

• Rent growth: Conservative assumptions of 1–3% annually.
• Expenses: Full recognition of current property taxes and insurance premiums.
• Economic vacancy: Includes concessions, bad debt, and loss-to-lease.
• Capex reserves: 10–15% plus 3–6 months of OpEx and debt service.
• Stress testing: DSCR at ≥1.25x under NOI and rate shocks.
• Debt strategy: Multiple take-out paths for debt maturities.

Operationally, syndicators are leveraging automation, AI-driven leasing, centralized management, and enhanced resident retention programs to drive NOI and reduce turnover costs.

Value-add and repositioning opportunities

With new supply slowing and rents beginning to rebound, 2026 offers a window for value-add acquisitions below replacement cost. Investors are targeting assets in submarkets where absorption has outpaced deliveries and the near-term pipeline is light. Small-scale amenity upgrades, energy efficiency improvements, and enhanced digital marketing are yielding outsized returns in a competitive leasing environment.

Comparative Summary: Key Metrics by Metro Area (Q1 2026)

Conclusion: Outlook and Strategic Takeaways for Investors

The Texas real estate market in Q1 2026 is defined by stabilization, cautious optimism, and a return to fundamentals. While the era of double-digit appreciation and rapid rent growth is behind us, the state’s demographic tailwinds, pro-growth policies, and diversified economy continue to underpin long-term demand.

For private equity and multifamily syndication investors, the current environment offers opportunities to accumulate well-located, operationally sound assets at realistic valuations, provided underwriting remains disciplined and operational efficiencies are maximized.

Key takeaways for investors

• Market selection: Focus on metros and submarkets where absorption has met or exceeded deliveries and the 2026 pipeline is light.
• Underwriting discipline: Model conservative rent growth, full expense recognition, and realistic exit cap rates.
• Operational excellence: Leverage automation, centralized management, and resident retention strategies to drive NOI.
• Risk management: Budget for rising insurance and utility costs, maintain adequate reserves, and monitor regulatory changes.
• Liquidity planning: Prepare for refinancing at higher rates and consider multiple exit strategies in a shifting capital markets environment.

Texas remains a leading destination for real estate investment in 2026, with DFW and Houston offering scale and resilience, Austin poised for recovery, and San Antonio providing stability and affordability. As the market transitions from volatility to normalization, disciplined investors with a multi-year horizon are well-positioned to capitalize on the state’s enduring growth story.