Posted on October 8th, 2024

As Texas continues to attract new residents and businesses, home prices have soared across the state. While cities like Austin, Dallas, and Houston have long experienced growth, even smaller markets and suburban areas have seen sharp increases in housing costs. For buyers navigating this competitive market, building a custom home or remodeling an existing property could be the most financially sound decision.

Here’s a look at why Texas home prices are where they are today, and why building or remodeling may be a smart alternative.

The Rise in Texas Home Prices

Over the past decade, Texas has become a national magnet for growth. Several factors have contributed to this surge in home prices:

1. Increased Demand Due to Population Growth: Texas has seen substantial population growth, fueled by its business-friendly environment, no state income tax, and relatively affordable cost of living compared to coastal states like California and New York. More people moving to Texas means higher demand for homes.
2. Limited Inventory: Texas cities, especially in the fast-growing suburbs of Austin and Dallas, have struggled with limited housing inventory. Existing homes are selling quickly, and with fewer homes available, competition is fierce. This has caused prices to spike as buyers engage in bidding wars.
3. Interest Rate Increases: While interest rates remain relatively low compared to historical averages, the Federal Reserve’s moves to curb inflation by raising rates have impacted mortgage affordability. Higher interest rates can reduce purchasing power, meaning buyers can afford less home for their money.

Why Build or Remodel Instead?

With Texas home prices high and inventory tight, building a custom home or remodeling an existing property can offer several advantages over buying in today’s market:

1. Customization and Control

When you build a home, you get the final say on design, layout, and materials. You can choose features that match your needs and style, ensuring that the home is exactly how you want it. Whether it’s energy-efficient upgrades, smart home technology, or luxurious finishes, you can create a living space tailored to your lifestyle.

In contrast, buying an existing home may require compromises, and remodeling may be necessary to get the features or functionality you desire.

2. More Bang for Your Buck

In many cases, the cost per square foot of building a home can be more favorable than buying an existing home, especially in areas where home prices are high. For example, in popular areas like Austin or San Antonio, the cost to buy an existing home can be more expensive than purchasing land and building from scratch, particularly when you factor in the long-term savings from modern energy-efficient features.

Similarly, remodeling can increase the value of your current home without the need to enter into a costly bidding war. You can make strategic upgrades, like adding extra rooms, modernizing the kitchen, or enhancing outdoor living areas, which can increase your home’s market value and offer immediate benefits.

3. Avoid Bidding Wars

One of the most frustrating aspects of today’s housing market is the competition. Many buyers are faced with multiple offers on a single property, driving prices even higher. Building your own home eliminates this issue. You can work with a builder at your own pace and budget without worrying about other buyers outbidding you.

4. Capitalizing on Land Prices in Growing Areas

In some parts of Texas, particularly in suburban and rural areas, land is still relatively affordable, especially compared to the skyrocketing prices in city centers. Building on this land can give you a larger lot size for a lower cost than buying an existing home with less land.

5. Energy Efficiency and Modern Standards

New homes are built to today’s energy and building standards, which can mean huge savings on utilities and maintenance over the long term. Energy-efficient windows, insulation, appliances, and HVAC systems can make a significant difference in monthly costs, especially in Texas’ hot summers. Remodeling your current home to meet modern efficiency standards is also a great way to improve your home’s value and reduce long-term energy costs.

6. Building Equity Over Time

With real estate prices continuing to rise, building or remodeling can be a strategic way to grow your equity. The value of land and real estate in Texas shows no signs of decreasing any time soon. By building or improving a home in a desirable area, you position yourself to take advantage of future appreciation, especially as more people move to the state.

Remodeling as a Viable Alternative

For homeowners already living in Texas, remodeling might be the best option to maximize the value of your existing home. You can upgrade your home to modern standards, expand its size, or add in-demand features like a home office, outdoor kitchen, or energy-efficient upgrades. Remodeling projects often cost less than buying a new home and can significantly increase your property’s market value.

If you’re thinking about building or remodeling in Texas, reach out to REDfish Developments Inc. and we can discuss options and the approach that is best for your budget and long-term goals. We are a full service development firm - offering architectural and engineering services as well as construction management. 

The Texas real estate market remains one of the most dynamic in the country, and with the right strategy, you can navigate it to your advantage.