More Texas homeowners and renters than ever before are struggling with rising housing costs, and the state’s soaring home prices could put the dream of homeownership 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 are well above levels seen before the COVID-19 pandemic.
High interest rates have cooled the Texas housing market after the state’s recent rapid economic growth caused interest rates to soar, forcing would-be homebuyers to scrape together more money than ever to purchase a home in the state’s major urban areas. The number of Texas homeowners and renters struggling to keep their homes is also now at an all-time high.
“The cost of buying a home puts homeownership out of reach for all but the most advantaged families,” said Daniel McCue, a senior fellow at the center.
Outpacing income growth
Texas home price growth has far outpaced income growth, pushing many families out of the housing market and all but erasing the state’s once-praised housing affordability.
Buyers now typically need to earn at least six figures to buy a home in the state’s largest metropolitan areas, where job opportunities are concentrated: Families need to earn more than $100,000 to buy a typical home in the Dallas-Fort Worth or Houston areas, according to the center.
Renters have less and less money to save for a future down payment or transition to homebuying. A record 2.1 million households (more than half of the state) are “cost burdened,” meaning they spend more than 30% of their income on rent and utilities. Of those, about 1.1 million households spend at least half of their income on rent and utilities, meaning they are “severely” cost burdened.
Homeowners are also feeling the hit from rising home insurance costs and soaring property taxes: Nearly a quarter of the state’s 6.9 million homeowners are paying too much for their housing, according to a Harvard University analysis.
The state’s high housing costs and a lack of housing the poorest Texans can afford led to a 12 percent increase in homelessness last year, according to federal estimates. More than 27,000 Texans will be without permanent housing in 2023, according to annual estimates of people who have experienced homelessness. About 11,700 Texans experienced unsheltered homelessness, which means sleeping in cars, under bridges or other places that are not suitable for human habitation.
Increase in rent relief
The state’s strong economic growth has sent rents soaring, putting record pressure on tenants, but an apartment construction boom not seen since the 1980s is giving them some relief, at least temporarily.
Asking rents in the Dallas-Fort Worth, Austin, Houston and San Antonio areas are down from last year as new apartment buildings open and existing landlords have to compete to secure new tenants, according to data from MRI Apartment Data.
“For renters, things have gotten better,” said Bruce McClenny, industry director at MRI ApartmentData. “It doesn’t make up for those crazy rent increases that happened in ’21 and ’22, but it’s starting to make a difference.”
According to the Harvard University report, it’s only a matter of time before rents rise again. Faced with rising borrowing costs, sluggish rental income, and rising operating costs such as owner insurance, wages, and property taxes, builders are holding back on new projects. Meanwhile, the state’s stable economic growth and growing number of Gen Z households will keep demand for apartments strong. McClenny said that as tens of thousands of apartments under construction in the state’s major metropolitan areas are completed, we could see another big rent increase like we saw in 2022 by the end of next year.
The Dallas-Fort Worth region “will be more vulnerable to (naturally affordable housing) because it has had a very hot housing market in the past and will likely continue to do so,” said Ashley Flores, the organization’s housing director.
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This story was originally published by The Texas Tribune and distributed through a partnership with The Associated Press.
