No, this is not going to be about the Lone Star State turning “purple,” mask mandates, environmental views, masses of transplants moving away from one state to the other, or famous actors as governors (although if Matthew McConaughey ran for governor of Texas we’d have the coolest governor by a mile).

This is now the “new hot topic discussed in the world of real estate — “Is Texas becoming the new California?”

Numbers Don’t Lie

The recent numbers are mind-blowing. In Tarrant County, from February 2020 to February 2021 the real estate market has taken a massive hit. In the past 12 months, the median sales price has increased nearly 16 percent to $280,000. During that same time period, the number of active homes on the Multiple Listing Service for purchase decreased 58 percent!

Those are staggering numbers for active home buyers and sellers. Imagine if you went to the grocery store to buy food and the shelves were only 40 percent stocked and the prices there 16 percent higher. You’d be a little freaked out wouldn’t you?

The real shocking number is the monthly housing inventory. That number represents how long it would take for all the homes currently on the market to be depleted, assuming no new homes come on the market. Currently, the number of months of housing supply for Tarrant County is LESS than one month — actually 0.9 months. In February 2020 the number was 1.3 months supply, which was ridiculously low at the time.

According to the Texas Real Estate Research Center at Texas A&M University, the monthly housing inventory is balanced and healthy when there is a supply between five to seven months. Good luck with that happening in Tarrant County anytime soon.

What Does This Mean?

We’ve looked at the numbers, we’ve discussed in the past how as many as 30,000 people are moving into Tarrant County every year, so what does this all mean?

First, it means there is going to continue to be more than plenty of competition for available homes across all price points. While 66 percent of the real estate transactions are between $200,000 and $400,000, there is still a considerable lack of inventory in the higher price ranges as well.

Secondly, it means that this trend and trajectory aren’t going to stop anytime soon. People and companies aren’t going to stop moving to Texas. The weather isn’t going to all of a sudden be horrible in Texas (with exception of a SNOVID-21). Businesses aren’t going to find a more business-friendly state with plenty of incentives and reasons to relocate their operations. This is not a bubble — this is here to stay.

Why Is This Happening?

It’s not rocket science figuring out why Texas is dealing with this issue. The interest rate to purchase a home remains extremely low – so people are realizing they can afford to purchase vs. renting a home. COVID-19 certainly shares some of the blame as well. When COVID hit many sellers were reluctant to put their homes on the market because they didn’t want strangers traipsing through their residences and possibly contributing to the spread of the virus. Those sellers who were on the fence about putting their home on the market decided against it.

So How is Texas The Next California?

This is the story so many realtors have heard from California transplants for the past decade or longer:

“I bought my home in California in the 1980s for $250,000 and lived there and enjoyed raising my family there and it just kept going up and up in value so when it came time to sell we sold it for $1.2 million dollars. When we tried to find a new home in an area we liked, we realized $1.2 million didn’t get us nearly the quality or location of the home we just sold. So we started looking at Texas and realized we could buy a very nice home in a great area of the state for a fraction of what that house would cost in California.”

That’s how the mass migration from California to Texas has gone for so many people. They come to Texas, snatch up real estate that is way less expensive than in California and feel they won the lottery. Then they tell their friends, family, or co-workers.

Now Texans are getting a taste of that scenario.

You might have bought a single-story home in Tarrant County for $150,000 in 2000 and now can sell it for $350,000, but many are realizing they can’t turn around and buy a home of that, or greater, quality and location for $350,000.

The replacement opportunity does not exist these days for many Texas residents, so they are staying in their homes. Unless they want to move way, way, way out to the country or remote areas of Texas, they are not able to replace the home they sold for a pretty penny, so they stay put. Which is causing the problem we are now dealing with.

What Does The Future Hold?

In the 1950 classic movie All About Eve, the great Bette Davis’ character uttered the famous phrase, “fasten your seatbelts … it’s going to be a bumpy ride.” (She actually said “bumpy night” but the often misquoted phrase works better in this article). And that’s what Texas real estate is in for — a bumpy ride.

If anyone tells you they know how this ends, they are lying to you. No one could’ve projected 0.9 months of inventory. No one projected 16 percent year-over-year home price increase in the middle of a pandemic. No one knows anything.

So find your favorite real estate sales professional (especially those with strong brokerages that sell a lot of properties off-market) and fasten your seatbelt … we’re in for an unchartered and bumpy ride.