In Texas, The Big Rival Is The Buyer’s Memory Of 2.65%

Homebuilders are still waiting for the COVID fog to lift, but the virus is no longer the culprit.

A fundamental issue affecting the Texas housing market is known in behavioral science as an anchoring bias. Buyers, sellers, analysts and even homebuilders sometimes still treat pandemic-era rates as a fixed point of reference.

That backward-looking mindset is turning good planning into bad timing.

Yes, the common refrain, “rates went up,” is true, but the changes run deeper. The financing regime has flipped, and the housing machine now runs on different physics, with higher monthly payments, thinner resale inventory and buyers who shop by payment first.

The fog is nostalgia with a spreadsheet

In Texas, we respect history, but we don’t underwrite it. The COVID fog shows up when decision-makers treat the 2.65% mortgage trough from January 2021 as a normal frame of reference rather than what it was, an extreme, unsustainable outlier created by a crisis policy response.

Mortgage rates rose more than five percentage points from that trough, reaching 7.79% in October 2023 and easing to about 6.2% by September 2024. When you keep benchmarking against 2.65%, every deal feels “temporarily broken,” which is a nice way of saying you stop making decisions.

The biggest competitor to a Texas builder in 2026 is not another builder – it’s the buyer’s memory.

The payment shock is real, and it’s measurable

Builders live and die by affordability, and affordability is measured by monthly payments.

The Consumer Financial Protection Bureau provided a simple example: on a $400,000 loan, principal-and-interest payments were about $1,612 at 2.65% (Jan 2021) and $2,877 at 7.79% (Oct 2023), a jump of $1,265, or about 78%. Even after rates eased to around 6.2% (Sept 2024), the payment was still about $2,450, roughly $838 higher than the trough (about 52% higher).

Home prices rose, too.

In the same CFPB table, the national median sales price rose from about $355,000 in January 2021 to $423,200 in October 2023 and to about $412,300 in September 2024. When both home prices and financing costs are surging, buyers feel the market “doesn’t make sense” because the payment doesn’t.

If you’re selling homes like it’s a price conversation, you’re losing buyers who are in a payment conversation.

Lock-in starves resale, creating a double-bind

Higher rates haven’t merely reduced buyer affordability; they have weakened supply. The CFPB notes that higher rates mean fewer homes are available for sale because homeowners who locked in low-rate mortgages have become hesitant to move, thereby creating a “lock-in effect.” In other words, the resale market gets sticky with fewer listings, fewer moves and fewer “natural” trade-ups.

For public builders, that creates a weird two-step.

Tight resale inventory can push shoppers toward new construction, especially when you can buy down rates or structure incentives. But it can also trap would-be move-up buyers in place, shrinking the pool for higher-priced products unless you actively solve payment and trade friction. Lock-in doesn’t just freeze homeowners; it freezes your funnel.

The policy hangover that inflated the baseline

Part of the reason the market feels distorted is that it was distorted. Brookings Institution documents that during the 2020–to–2022 QE period, the Fed purchased $1.33 trillion of agency mortgage-backed securities, accounting for nearly 90% of the growth in agency MBS during that window.

The same Brookings piece describes how home values “soared” during that period and then “plateaued” after QE ended, and it frames housing’s role as central to the post-COVID inflation jag.

The practical point for builders isn’t politics; it’s the baseline. That policy era pulled demand forward, inflated asset values, and handed many households golden handcuff mortgages. Then the cycle reversed, leaving the industry trying to price, forecast and build in the aftershock.

We didn’t just come out of COVID; we came out of an artificially low-rate environment that rewired buyer expectations, i.e., anchored them to a fleeting, false benchmark.

The level-set

The fog clears when you stop waiting for “normal” and start operating in “current.” The same CFPB analysis underscores the reality of affordability. By late 2023, principal and interest on the median-priced home rose to about $2,891 (with 5% down) as rates peaked. The CFPB notes that for a typical household, affording the median home would require a much higher share of income than during the low-rate period, unless income rises sharply, rates fall toward the 2.5% range, or prices drop substantially. 

The builder playbook must become sharper and less romantic. Underwrite to payment bands, not just price points; the buyer qualifies emotionally before they qualify with the lender. Treat incentives as product strategy, not end-of-quarter panic; if a $400,000 loan’s payment swings by hundreds of dollars with rate moves, financing tools are part of the “spec.” Plan for resale friction; the lock-in effect means turnover won’t “snap back” just because you want it to. Run scenarios, not forecasts; the post-2020 world punishes single-point certainty, especially when rates and spreads can move faster than build cycles.


The market doesn’t owe you 2021 absorption; you owe your shareholders a 2026 plan.

A new-normal mantra

Texas builders don’t need more hope in the pro forma; they need cleaner assumptions. Rates may drift lower, but the CFPB’s own math shows that returning to 2021 affordability would require extreme moves (rates near 2.5% or sharply lower prices), and that’s not a planning case; it’s a prayer.

Build for the buyer you have. Become payment-sensitive, skeptical, and tired of being told to wait for a better world. When you price and market to today’s payment reality, you don’t just sell homes; you take market share from competitors still arguing with the past.