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January home sales increased month over month (MOM), but it was the slowest start since January 2017, a far cry from January levels from both 2021 and 2022. Other housing metrics, such as median price and inventory, may be showing early signs of stabilizing with only minor changes in recent months compared with the major swings experienced during the pandemic.

Supply¹

Single-family construction permits had been sliding down in demand since March 2022. January 2023’s permit level fell 6.9 percent MOM to 8,897 permits. The other two months during the past three years that monthly permits dipped below 9,000 were during the initial pandemic shock in April and May 2020. Construction permits fell in all major metros except Austin. While housing demand in Houston (2,842 permits) was mostly flat, Dallas (2,249 permits) dropped more than 15 percent MOM. Austin’s monthly construction demand (1,082 permits) rebounded 10 percent, issuing twice as many permits as San Antonio (481 permits).

Texas single-family construction starts have likewise plummeted since March 2022 but started 2023 with a positive month in January with 9,090 units. Although construction starts rebounded in every major metro, the January metric was the lowest level reported in Texas since 2016, suggesting a meek outlook for the housing industry.

The state’s total single-family starts value diminished from $3.8 billion in January 2022 to $2.2 billion in 2023. Houston and Dallas continue to account for more than half of the states total, coming in at 27.5 percent and 26.1 percent, respectively. Further pressing the point home that housing activity is down from the previous year, Austin and San Antonio had their construction values nearly cut in half in the first month of 2023.

The rebound in active listings had been aggressive since March 2022. However, the acceleration slowed in the past two months as the metric fell flat at a seasonally adjusted rate of 91,000 units. Compared with the first half of 2022 when inventory was 50 percent short of pre-pandemic levels, housing inventory was only 4.5 percent short in January. Active listings in Austin have more than tripled from a year ago, reaching 8,500 units. Amid the recent flattening, months of inventory (MOI) dipped for the first time in the past eight months. The MOI for the four major metros ranged from 2.5 months to 3.4 months. While Dallas, Austin, and San Antonio all either hovered back or beyond pre-pandemic levels, Houston’s housing supplies still needed more homes to restock.

Demand

Total home sales inched up 3.4 percent MOM to a seasonally adjusted rate of 27,475 sales. This uptick marked the largest MOM jump since the second half of 2022. Sales in Austin and Houston rebounded greatly, with the former metro surpassing San Antonio’s sales volume and the latter surpassing Dallas’ (Table 1). While the housing market opened robustly in 2023, Texas’ sales still diminished by over 20 percent compared with last year’s January metric.