Although mortgage rates arent the only factor to consider when it comes to buying or selling a home, they tend to dictate the tempo and intensity of the housing market. And it was fast and intense in Dallas-Fort Worth and Texas in general in 2020. Now that weve rung in a new year, heres what to expect in 2021.

The Current State of Mortgage Rates in Texas

Trickling down from the Federal Home Loan Mortgage Corporation (Freddie Mac) to regional markets in all 50 states are mortgage rates at all-time lows. In fact, the 30-year fixed rate mortgage fell below 2.8 percent in 2020. These record-low rates for borrowers have fueled a boom in Texas real estate, consolidating already astonishing historical growth. Texas house prices have increased by a staggering 136 percent in the last 20 years, and theres no sign of prices easing off. 

Key real estate indicators:

• The average days on market fell to a record low of 44 days in Texas, and to 35 in Dallas. 
• The average house price in Dallas-Fort Worth is now $237,200 and predicted to rise 11 percent in 2021. 
• An extreme shortage of homes under $300,000 will continue to drive up house prices. 

Clearly, as long as borrowing costs remain remarkably low and prices rise steady, investment will continue to flow into the Texas and Dallas-Fort Worth market. Theres no indication that price rises are creating a bubble, either. A healthy 35 percent of Dallas homes are owned free and clear and just 8 percent of households report being behind on mortgage payments. 

Factors That Influence Interest Rates

While interest rates are a tool of federal government policy and respond to fluctuations in supply and demand, inflation and government borrowing, they resonate on an individual level for homebuyers and sellers. Even a small increase in interest rates can add hundreds of dollars to monthly mortgage repayments or tens of thousands of dollars to overall interest paid. 

But they are not the only barometer to consider. The housing market and cost of borrowing are also affected by unemployment, consumer spending and price increases, as well as inflation, which is expected to remain low at around 1.7 percent in the year ahead. Taking all these factors into consideration, Texas and Dallas-Fort Worth fare relatively well, even after counting the cost of the Covid-19 pandemic. 

Where Were Heading in 2021

Experts typically agree that rates will climb above 3 percent in 2021, so a significant hike is not on the horizon. But the lowest rates are only available to those with good credit scores and credit history. The barrier to entry for first-time buyers is still imposing. The most important metric to keep an eye on is house prices in Texas, which are expected to appreciate steadily, posting an increase of 5 percent in 2022. In Dallas-Fort Worth, home prices could reach an average of $316,000 in 2021, outstripping Texas three other major metro areas. 

What Mortgage Rates Mean for Buyers and Sellers

Steadily rising house prices mean good news for one side of the transaction only; its still a sellers market in 2021, as Forbes confirms. It might be harder than ever to get onto the housing ladder, but there has never been a better time to do so for those who can afford the down payment, particularly in Dallas and Texas as a whole. 

Why Texas is booming: 

• Dallas Fort-Worth is one of the nations top 10 real estate markets according to the National Association of REALTORS. 
• Homes in North Texas offer outstanding price-per-square foot affordability. 
• The local economy is strong, with strong employment and a lower proportion of workers employed in retail and hospitality (the worst-hit by the pandemic). 
• Steady migration from the West Coast (Dallas is the 2nd most popular destination) continues to fuel price rises. 
• No state capital-gains tax makes Texas real estate an attractive investment. 

We have no crystal ball to look into for 2021, but the indicators are there for all to see. North Texas, in particular, and Texas, in general, should continue to reap the benefits of steadily rising house prices and relatively low mortgage rates well into 2021 and beyond.