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Are today's incomes keeping pace with housing costs?
America boasts a strong economy, low rate of unemployment, and more homeowners than ever before. So why are many people claiming that housing has never been less affordable?
An informal sampling of TAR members supports the assertion that skyrocketing housing costs have produced an affordability problem for many consumers. Rural areas still maintain steady housing costs, but the prices in the metropolitan regions of Austin, Dallas, Houston, and San Antonio have eclipsed many people’s incomes.
Many REALTORS® worry that low- to middle-income buyers are being squeezed out of the housing market.
"Sticker shock is the norm," asserts Marcia Livingston of Keller Williams in Houston. "My buyers in central and southwest Houston are having to choose among buying a smaller house than they anticipated, moving further out, or buying a home needing more work than they’d planned."
Contrary to many REALTORS®’ experiences, a recent study of 15 metropolitan areas by the U.S. Census Bureau concluded that Americans today spend about the same percentage of their incomes on housing costs as they did 15 years ago. However, critics of the study argue that the sampling ignored important variables, such as whether people are working longer hours or more household members are working to meet housing costs.
Jack Harris of the Real Estate Center at Texas A&M argues that changes in affordability over time depend on interest rate trends. The declining interest rates of the 1990s corresponded with improvements in affordability; however, interest rates have risen during the past year in response to tightening by the Federal Reserve. This rise in rates, along with large price increases in many areas, has led to worsening affordability.
Regardless of what the numbers say, the current trends worry Virgil Eaves, president of the Bastrop County Board of REALTORS®. "Lower-income folks who once made up most of our area can scarcely afford to live here. The ones that do must settle for a ‘coin toss’ home...you could toss a coin to decide whether to fix it up or tear it down."
Buyers & sellers,
visit www.texasrealestate.com.
REALTORS®, visit www.tar.org.
