The Texas Housing Market Disconnect: FHA Mortgages, Foreclosures, and a Price Drop Trend

A close look at the latest housing data reveals some interesting, and in some cases, surprising trends, especially for those of us focused on the Texas real estate market.

FHA Mortgages and Foreclosures

According to a chart from the New York Fed, FHA mortgages are a concentration point for foreclosures. If you look at the map for the second quarter of 2025, you'll see a clear concentration of FHA mortgages in the Southeast. And this is where we're seeing the highest foreclosure starts.

The good news? Texas is not leading the way in this category, thankfully.

Texas is showing a foreclosure start rate of about 17% for FHA mortgages in Q2 2025. That number is significantly higher in some neighboring states, such as Oklahoma and Mississippi, and consistently close to Florida's numbers. While 17% is still a figure to watch, it means Texas isn't experiencing the worst of this particular trend. We're happy to see we're not at the top of that list.

Texas is Leading the Way in Price Drops

While Texas may not be leading in foreclosures, we are seeing a significant trend that's highly relevant to both buyers and sellers: price drops.

The data shows that properties in Texas with a price decrease are currently averaging around 44%. That means almost half of the homes on the market have seen a price reduction.

This suggests that home buyers and home sellers are still a little bit out of sync. Sellers' price expectations aren't quite matching up with what buyers are willing to pay, leading to widespread reductions.

It's worth noting that while 44% is a high number, it's not the highest we’ve ever seen. Back in November 2022, we saw this figure peak slightly higher at about 46%. However, we have remained consistently in that 40-44% zone for a long time now.

Home Builders are Driving the Market

A major emerging trend—even more significant than individual home sellers dropping their prices—is the aggressive strategy of home builders.

Home builders are dropping their prices on an almost monthly basis. The homes that have been sitting the longest on their inventory are the ones receiving the biggest, most aggressive price cuts.

This strategy is creating great opportunities for buyers. I recently helped a family shop for a home in Georgetown, and they were able to find the perfect house at the perfect price because the builder had dropped the price by a staggering $60,000!

The Takeaway

The Texas housing market is navigating a complex landscape. While we're seeing high concentrations of FHA mortgage foreclosures in the broader Southeast (and Texas remains a part of that trend), the aggressive price reductions, particularly from builders, are creating excellent opportunities. Buyers are finding themselves in a position to secure significant value, especially when looking at new construction.