Texans Increasingly See Housing Costs Out Of Reach

Buying a house in Texas is getting harder, not easier, looking at several economic factors.

People who move to Texas hear the sales pitch over and over: it’s cheap to live here. And in many ways, that is true. The state has no income tax, comparatively cheap gas and food, and lots of land. However, many hidden costs are making more and more young people realize a house is out of reach.

First is the property tax problem. Despite a generous tax cut from the Republican-controlled state legislature, many low-income Texans are still struggling to pay their tax bill. The state has the sixth-highest property taxes in the country, mostly to make up for the lack of income tax. Even with the new homestead exemptions and caps, the costs go up every year faster than most Texans’ incomes do.

Texas certainly isn’t the only place in America where young people are saying that homes are out of their price range. More than half of Americans aren’t even considering buying a home because of the cost according to a CNBC survey on youth and the economy, 55 percent of people 18-35 aren’t thinking of buying a home even with dropping interest rates.

A look at the Texas market can show why. In all major urban areas of the state, the price of homes is going up faster than the average income. The Kinder Institute for Urban Research’s 2022 State of Housing in Harris County and Houston looked into income and home prices in 2022 in Houston and other metro areas, and the numbers are pretty grim.

Most financial institutions recommend that a home value should not be more than 3-5 times the total household income. In Houston, the average house is 5.27 times the average per capital income. It’s 6.2 in Dallas, 6.3 in San Antonio, and a solid 7 in Austin. As houses become more of an investment piece than a home, the price climbs while wages for potential buyers stalls.

One reason for the slow wage growth in Texas is its low minimum wage. Since 2009, the Texas minimum wage has remained at $7.25 per hour, the federal minimum, and the state legislature has made no move to increase it. The wage would need to be nearly $11 just to keep up with inflation, let alone lift millions of Texans out of poverty. Even then, buying a home on a minimum wage income remains virtually impossible.

There is some indication that the market may be contracting. Because of the state’s famous wide-open spaces, house building is typically easier and cheaper. That has led to a small surplus of available homes sitting vacant as investors wait to cash in. Prices have fallen 4.6 percent in the San Antonio area, a steep decline when most of the rest of the country is still seeing gains.

A combination of wealth inequality, too many houses built as investments, and rising property taxes are keeping buyers on the sidelines, especially younger first-time buyers. They’ll have to wait a long time for the situation to improve significantly.