In parts of Texas, the luxury real-estate market is hotter than a billy goat in a pepper patch. Median home prices appreciated as much as around 10% from late 2013 to late 2014 in the state’s top metro areas, compared with 6% nationwide, according to the National Association of Realtors, a trade group. Because developers didn’t overbuild before the recession—and still aren’t doing so—homes in Texas didn’t suffer the sharp price drops that the rest of the nation did in the housing crisis of 2007, says Lawrence Yun, chief economist with NAR. “At this point in time, more construction would be a better thing for home buyers,” he adds. Still, high-end homes are much cheaper than in other parts of the U.S., so Texans can afford bigger properties and qualify for jumbo loans, says Shannon Schmitz , CEO of the Austin-based Shannon Schmitz Group. In Austin, the state’s priciest market, the median sale price for an existing home was $240,700 in December, a 10.7% year-to-year rise, according to NAR. That’s less than a third of the $737,600 median price in San Francisco. The median price in Dallas-Fort Worth was up 9% to $188,300, and the Houston metro area was up 9.3% to $198,400. More loans are also likely to be jumbos because the upper limit for government-backed loans in all of Texas is $417,000, rather than the $625,500 for high-price areas like San Francisco, New York and Washington, D.C. Dallas-based lender NexBank’s jumbo-mortgage business is thriving in the “Texas Triangle,” the Dallas-Houston-Austin metro areas. The company’s average jumbo loan amount in Texas is $500,000, accounting for $100 million in Texas jumbo volume over the past 12 months, says S. Matt Siekielski, executive vice president and chief operating officer. The lender’s average jumbo loan size in California is $1 million, he adds. Texas jumbo borrowers are a blend between employed professionals—business executives, doctors, lawyers—and self-employed small-business owners, Mr. Siekielski says. “There’s not a big difference in the borrower profile between California and Texas,” he adds. “What you get is more bang for your buck in Texas.” Indeed California and Northeast transplants can go “from a shoebox to a mansion,” says Bryan Sherman, Bank of America’s regional sales executive for Texas and New Mexico. Jumbo borrowers at Bank of America are an average age of 42 years, make a down payment of at least 20%, and have a high credit score and a stable income, Mr. Sherman says. About 75% of the bank’s jumbo business in Texas was purchase versus refinance in 2014, he adds. “None of my clients are having any problems qualifying for financing,” Ms. Schmitz, the real-estate agent, says. Austin homes priced between $500,000 and $1 million are getting multiple offers, downtown condos typically start at $1 million due to limited inventory, and any in-town home priced up to $3 million won’t be on the market long, she adds. Dallas home buyers also can afford more land and tend to want at least an acre or more, says Allie Beth Allman, owner/broker of Dallas-based Allie Beth Allman & Associates. So far, the plunge in oil prices hasn’t slowed Texas home sales and appreciation, but if the slowdown lingers too long, they might, Mr. Yun says. “The Texas economy is less than 5% related to oil, but there could be an indirect confidence effect,” he adds. John Walsh, CEO of Milford, Conn.-based Total Mortgage, remains optimistic. The economy in Texas, like the home market, wasn’t as hard hit by the recession and recovered quickly, he says. “Texas seems to do well in both good and bad times,” he adds. “It’s almost its own economy with the oil and other industry down there.” Of the 33 states where Total Mortgage does business, Texas ranks third behind California and New York in terms of the dollar amount of jumbo loans, and interest rates and product lines are similar, Mr. Walsh says. More considerations: • Refi regulations. In a vestige of old homestead protection laws, Texas cash-out refinances are bound by the provisions of any previous refinance, Mr. Walsh says. Many lenders thus won’t refinance a home that already has had a cash-out loan, he adds. • Some cash competition. Most high-end Austin home buyers opt for jumbo mortgage financing because of the low interest rates, but similar to San Francisco and other places with tight markets, borrowers may lose to cash in bidding wars, Ms. Schmitz says. Cash competition is more likely when values are under $1.5 million, she adds. • Fast foreclosure. Borrowers should keep in mind that Texas law allows lenders to foreclose more quickly than in some other states, such as New York and Florida.