More Texans struggling with housing costs than ever before

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More Texas homeowners and renters than ever are struggling with high housing costs — and the state’s high home prices have potentially put the dream of owning a home out of reach for a growing number of families.

That’s according to a new report from Harvard University’s Joint Center for Housing Studies, which also found that home prices and rents remain well above where they were before the COVID-19 pandemic. The Texas housing market has cooled amid high interest rates after steep increases fueled by the state’s recent torrid economic growth. So potential homebuyers now have to shell out more money than ever before in order to buy a home in Texas’ major urban areas. The number of Texas homeowners and renters struggling to keep a roof over their heads is also now at an all-time high.

“The costs of buying a home have put home ownership out of reach for all but the most advantaged families,” said Daniel McCue, a senior research associate at the center.

Texas home price growth has dramatically outpaced income growth, pricing many families out of the market and erasing all of the state’s former housing affordability.

It is now common for buyers to have to make at least six figures to buy a home in major urban areas where the state’s employment opportunities are largely concentrated. A family needs to make more than $100,000 to buy a typical home in the Houston and Dallas-Fort Worth areas, according to the center. In the Austin area, a buyer would need to make more than $140,000 to afford a home at the median sales price.

Renters have less and less room to put money aside for a future down payment and make the transition to home ownership. A record 2.1 million renter households — more than half of those in the state — are “cost-burdened,” meaning they spend more than 30% of their income on rent and utilities. Of those, nearly 1.1 million put at least half of their income into rent and utilities, meaning they are “highly” cost-burdened.

Homeowners, too, have felt the pinch from rising homeowners insurance and high property taxes. Nearly a quarter of the state’s 6.9 million homeowners spend too much on housing, according to the Harvard analysis.

The state’s high housing costs and a lack of affordable housing for the poorest Texans fueled a 12% increase in homelessness last year, according to federal estimates. More than 27,000 Texans did not have a permanent roof over their heads in 2023, according to an annual estimate of people experiencing homelessness. About 11,700 Texans experienced unsheltered homelessness — meaning they slept in their cars, under bridges or in other places not fit for human habitation.

However, in some parts of the state, the cost of housing is falling.

Home prices in Austin, where the typical home fetched more than half a million dollars at the peak of the state’s pandemic-era housing market, have fallen for 16 straight months, according to Zillow data. San Antonio has also seen months of declining home prices.

High interest rates have dramatically slowed the pace of home buying, contributing to lower housing prices. This slowdown has allowed homes to remain on the market for longer periods of time than during the highly competitive days of the hot pandemic housing market and has increased the supply of homes available to potential buyers. More supply means buyers have more leverage to negotiate lower prices with sellers.

“Buyers are still very resistant to elevated home prices, and of course, mortgage rates,” said Clare Knapp, housing economist for the Austin Board of Realtors. “But with that increase in active listings, they have more bargaining power. So it’s certainly giving them a boost in a more challenging environment.”

At the same time, high interest rates and home prices have discouraged homeowners who might otherwise have put their homes on the market from giving up their low interest rates, according to the Harvard report. – promoting the lack of available housing in the country.

Steady job growth has also kept home prices high. In places like Houston and Dallas-Fort Worth that saw home prices decline last year, prices are starting to rise again.

“It’s really hard for you to see a significant price correction,” said Luis Torres, senior business economist at the Federal Reserve Bank of Dallas.

Rising rents fueled by the state’s robust economic growth put record pressure on renters. But a boom in apartment buildings not seen since the 1980s has brought them at least temporary relief from rising rents.

Asking rents have fallen over the past year in the Austin, Dallas-Fort Worth, Houston and San Antonio regions, figures from the firm MRI ApartmentData show, as new apartments open their doors and force existing landlords to compete to keep tenants. young people.

“For renters, it’s a better situation,” said Bruce McClenny, industry director at MRI ApartmentData. “It doesn’t make up for all that crazy rent growth we had in ’21 and ’22. But it’s starting to make a difference.”

It’s only a matter of time before rents rise again, says the Harvard report. Builders have pulled back from new projects amid high borrowing costs and as property owners see lower rental income growth and increased operating costs such as homeowner’s insurance, wages and property taxes. Meanwhile, the state’s steady economic growth coupled with the growth of Generation Z households will ensure that demand for apartments remains strong. McClenny said larger rent increases like those seen in 2022 could return by the end of next year as tens of thousands of apartments under construction in the state’s major metro areas come online.

Still at risk is the state’s supply of cheap housing, housing experts say. Texas has lost hundreds of thousands of affordable rental units over the past decade, exacerbating an already dire shortage of affordable housing for lower-income families.

The state had about 753,000 housing units renting under $600 near the start of the last decade. As the state’s economy boomed and demand for rental housing increased, that supply decreased as landlords simply raised rents or renovated their properties to attract higher-income tenants.

By 2022, the supply of affordable rental housing had dwindled to less than half a million units.

Housing experts expect more of these units to disappear in the coming years. Dallas has a shortage of about 33,000 affordable units for families making 50% or less of the area median income, according to an analysis by the Dallas-based Child Poverty Action Lab. That shortage is expected to rise to more than 80,000 by the end of the decade, the organization projects.

The Dallas-Fort Worth region “has been and will likely continue to be a really hot housing market that does [naturally occurring affordable housing] more vulnerable,” said Ashley Flores, the organization’s chief housing officer.

Local and state leaders are increasingly trying to solve the state’s housing affordability crisis.

Texas lawmakers, including some of the state’s top Republicans, have increasingly signaled that one way they will look to combat the crisis is by loosening city rules that determine what kind of housing can be built and where. Housing advocates have increasingly targeted city zoning restrictions, such as how much land a single house must sit on and how many houses can be built on a given lot, as a root cause of housing affordability difficulties. country. Those rules, they say, have limited the number of homes that can be built and led to higher housing costs as a result.

“In many ways, the current zoning laws we have don’t reflect the wishes of the people,” McCue said. “So it’s good to revisit them.”

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