4 Of The 5 Fastest Growing Big Citites Are In Texas

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Home Building In Texas

If you have any questions about the real estate markets here in Texas, now is the time to discuss these in relation to your business or personal real estate investments. Premier Real Estate here in Lake Kiowa, is here for you. Let us make an appointment to discuss your current needs. This article does have a positive perspective about the overal condition of the Real State Market In Texas. Some things have changed, some things have definitely driven up costs, but this information is valuable to you as an invester, home owner, or even business owner.

You have probably heard for years that Texas has built a reputation as a place where families can live well for less. In addition you have probably also heard that several of its metropolitan areas are consistently ranked among the nation’s most affordable as well. The good news for us here in Texas is that the economic success of our cities is changing that picture a little but not as much as most other states. While some costs have risen, according to the Federal Reserve Bank of Dallas, the rise in Texas home prices has outpaced that of the nation as a whole since 2011.

Dr. Ali Anari Research Economist, Texas A&M Real Estate Center Another important fact is that a recent Texas A&M Real Estate Center study says Texas housing prices have risen enough to reduce Texans traditional cost of living advantage. The state's growing economy isn't all over the state, but Dr. Ali Anari a research economist at Texas A&M Real Estate Center indicates as of March 2018, "Texas created jobs at an annual rate of 2.5% from December 2016 to December 2017, which is still higher than the nation's employment growth rate of 1.4 percent." In the next few paragraphs, we will be quoting his statistics realeased in March of 2018.

Texas does also continue to experience explosive population growth, gaining nearly 1,100 people per day. According to recent Census estimates, four of the nation’s five fastest-growing large cities (those with 50,000 or more residents) are in Texas — Conroe, Frisco, McKinney and Georgetown, all of them located within the state’s largest metropolitan areas.

What About Rising Building Costs?

Texas homebuilders are struggling to meet the strong demand for affordable single-family homes. One of the ongoing problems they face has been a lack of skilled construction workers following the housing bust of the Great Recession. In the recent years between 2007 and 2013, the nation’s builders lost more than 2 million workers, and only 40 percent of them ultimately returned to the industry. The Federal Reserve Bank of Dallas reports that Texas’ residential construction job count fell more than total employment during the recession, and took more time to rebound.

This ongoing shortage of carpenters, masons and other skilled workers led to higher wages, which increase the bottom-line price of homes. And construction worker pay is rising much faster in Texas than in the nation as a whole. Inflation-adjusted average hourly earnings in Texas’ construction sector rose by more than 20 percent between 2011 and 2016, versus just 4.7 percent for the U.S. construction sector — and nearly four times the 5.9 percent growth in Texas’ total average private-sector earnings. An additional factor of interest is the cost of land itself, which we will discuss now.

“Land costs account for 20.4 percent of Texas home prices, historically the highest percentage [we’ve seen] and up from 14.1 percent in 2000,” Anari says. And Texas’ land price index, a measure of the extent to which land prices change over time, indicates prices are increasing quickly. “Since 2000, the Texas land price index for single-family homes has increased by 122 percent, compared with 95 percent nationally,” he says.Government regulation also plays a role as well. According to the Texas Public Policy Foundation, many Texas cities have reacted to rapid growth by enacting strict zoning codes — ordinances controlling land use and construction — that remove tracts of land from development, driving up demand and prices.

Where building can take place, the cost of regulatory compliance contributes to higher prices. Such costs can include permit, hookup and “impact” fees, environmental surveys, requirements for specific building materials and much more — all well-intentioned, but all adding to the bottom line.

A 2016 study by the National Association of Home Builders estimated government regulations account for nearly a quarter (24.3 percent) of the final price of an average new single-family home. And between 2011 and 2016, these regulatory costs rose by nearly 30 percent, while the nation’s per capita disposable income increased by just 14.4 percent. In other words, regulatory costs are rising more than twice as fast as the average American’s ability to pay for a home.

Rising costs associated with building have made the development of moderately priced housing difficult and less profitable for homebuilders. As a result, single-family home construction is skewing away from “entry-level” housing and toward larger, more expensive — and more profitable — homes.

The stock of entry-level homes is most limited in the state’s major metropolitan areas, although an abundance of homes is available at higher price points. According to the Real Estate Center, sales of homes priced from $300,000 to $399,000 have been rising since 2012, while sales of homes priced below $200,000 have been either flat or declining.

Perhaps unsurprisingly, the booming Austin-Round Rock area had the highest median home price in 2017, at $299,900. And, while Austin has the highest median price, it hasn’t seen the fastest price increase. That distinction falls to our near neighbors in Grayson County’s fast-growing Sherman-Denison metro area, which saw an 83 percent increase in its median price between 2011 and 2017 (Exhibit 2), although that price remains well below the state median.*Metropolitan Statistical Area as defined by the federal government. Note: Texas A&M Real Estate Center began tracking single-family data separately in 2011. Source: Texas A&M Real Estate Center

Please note that according to these same statistics, that Texas housing still remains a bargain compared to many other areas of the nation. According to the Real Estate Center, for instance, in November 2017 the median sale price for existing Texas homes was about $218,000, while the median price realized for new homes was nearly $286,000. The National Association of Realtors, by contrast, reports the nationwide median price for existing homes was $248,200 in November 2017. In the same month, according to the Census Bureau, the median U.S. price for new homes was $334,900.

Rising Rental Markets

Did you know that Texas has a large rental housing market? The Texas State Affordable Housing Corporation reports about 38 percent of Texans are renters; these include the majority of the state’s newcomers. Inevitably, the same factors affecting demand and sales prices have boosted rents in some regions.

Reasons for these mixed market conditions contributing to high rents include a limited supply of land zoned for multifamily use and high development costs. As with single-family housing, high costs incentivize developers to build properties designed to yield higher returns. The most recent study by Harvard University’s Joint Center for Housing Studies, indicates that most of the new multifamily construction under way across the U.S. is at the higher end of the market, with low-rent units growing increasingly scarce in major cities.

Growing demand from higher-income households, such as relocating professionals, also can push rent higher. That said, not that the Austin, DFW and Houston metro areas, currently have the highest median monthly rents in Texas as does Midland whose energy-related industry is surging back after the oil price slump. Together, these areas have helped push the median Texas rent to $956, even though rents trend lower in most other Texas metro areas. The U.S. median rent was similar, at $981 in 2016.

Austin-Round Rock also leads the state in its rate of rent increase, followed by smaller metro areas including Abilene, Lubbock, Odessa, Midland and San Angelo (Exhibit 4). With the exception of Midland, however, each of these smaller cities had median gross rents below the state median, as seen in Exhibit 3. The state’s median rent rose by 17.6 percent between 2011 and 2016, easily outpacing the national rate of 12.6 percent.

Housing Costs Versus Income

In noting analysis of the high housing costs, you must realize they pose challenges for households and for the state’s economy. The cost and availability of affordable housing can determine a family’s access to work, education, shopping and many more factors are affected. It also affects employers’ ability to hire and retain qualified workers, which in turn can influence where companies choose to locate and expand.

Although Texas’ housing affordability remains favorable compared to other states, high housing costs in some regions force many households to make serious tradeoffs. These often include commuting farther to work each day, postponing or forgoing homeownership, living in more crowded housing and spending a greater share of income on housing. And these trade-offs are particularly challenging for households with low incomes.

Most of these types of information are coming from metro areas listed are Austin-Round Rock, Midland, Dallas-Fort Worth-Arlington, Houston-The Woodlands- Sugar Land, San Antonio-New Braunfels, Corpus Christi, Odessa, Lubbock, Abilene, College Station-Bryan, Killeen-Temple, Victoria, Tyler, San Angelo, Beaumont-Port Arthur, Amarillo, Waco, Longview, Laredo, El Paso, Sherman-Denison, Wichita Falls, McAllen-Edinburg-Mission, Texarkana, Brownsville-Harlingen.

*Metropolitan Statistical Area as defined by the federal government and their source information is the last US Census Bureau reports. The latest Census estimates indicate 26.4 percent of Texas homeowners with mortgages are “cost-burdened,” spending 30 percent or more of their household incomes on house payments, still slightly below the comparable U.S. figure of 28.1 percent.

In addition to those figures above, mortgage payments, property taxes also make it more difficult to afford homes. In a Tax Foundation analysis based on 2014 tax information, Texas had the nation’s sixth-highest “effective” property tax rate (the average amount of residential property taxes paid expressed as a percentage of home value — in Texas’ case, 1.67 percent).

In general, renters are even more likely to be cost-burdened — 43.9 percent of Texas renters and 46.1 percent of renters in the U.S. spend 30 percent or more of household income on rent and utilities.

According to the Texas State Affordable Housing Corporation, a Texas household must earn $18.38 per hour or $38,234 annually to afford the state’s average fair-market rent of $956 for a two-bedroom apartment without being cost-burdened. Unfortunately, the average renter in Texas earns only $17.89 per hour.

What about our future in Texas?

There are many opinions  on the extent of Texas’ future housing challenges, but it is a fact that economic growth and population increases will put continuing upward pressure on the state’s home prices and rents.For real estate agents, business concerns, home owners, and economic issues may need to help more in the coming months and years if Texas wants to maintain its overall reputation for a low cost of living.  Our state and local policymakers must consider the factors driving price increases — and act on those they can influence. For Texans all over the State, it's always been we are untited to help each other maintain those factors that will ultimately keeps costs down, investments up, and keep them there.

Call us today at Lake Kiowa Real We are here to support you in getting the best prices, at the right time, as buyers and sellers of real estate in Texas. Call us today and see how hard we work for all our clients.

Lake Kiowa Premiere Real Estate looks forward to many years of serving the Lake Kiowa community. Please come see us for all of your real estate needs, but feel free just to stop by any time and say hello too!  Lake Kiowa Premiere Real Estate is open 7 days a week – Monday through Saturday from 9:00 AM to 5:00 PM and Sunday from 11:00 AM to 5:00 PM.

The agents of Lake Kiowa Premiere Real Estate are always available to help you with any questions or concerns.


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