Move To Texas? Cheap Housing Is Fading Fast In 4 Major Lone Star Cities

Once known for its budget-friendly living, Texas is now seeing a swift decline in housing affordability, notably in its four major metro areas: Austin, Dallas, Fort Worth, and San Antonio.

Drawn by the state's historically low cost of living, an influx of domestic and international migrants has led to surging housing demand, pandemic-related supply shortages, and rising home prices, according to information issued by the Federal Reserve Bank of Dalllas.

Between 2010 and 2020, Texas' population boomed, with half the increase attributed to migration. As remote work became popular and the state maintained less stringent COVID-19 restrictions, in-migration accelerated by nearly 60%. Consequently, cities like Dallas-Fort Worth and Austin attracted the highest number of migrants and saw home prices jump.

The affordability crisis is now evident in Texas' four major cities, according to the Dallas Fed, where the percentage of homes affordable for a family earning the area median income has plummeted.

In 2014, around 60% of homes were affordable, though, by the fourth quarter of 2022, the 60% figure decreased to less than one-third. The impact is also visible in border metros including El Paso, Brownsville, Laredo, and McAllen.

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Heightened mortgage rates, driven by the Federal Reserve's efforts to combat inflation, have further burdened prospective homebuyers. With 78% of buyers in 2022 relying on mortgages to finance their purchases, increasing rates have contributed to a steep drop in home sales nationwide.

Despite rising rates and inflation, the Dallas Fed said young and first-time homebuyers remain active in the market. Even though they tend to have less negotiation experience and limited financial resources, they often secure larger mortgage loans than older buyers.

The current mortgage market conditions differ significantly from those that led to the Great Recession, throughout the pandemic, mortgage performance remained strong, with delinquencies in Texas staying below pre-pandemic levels. Homeowners now have considerable equity in their homes and have improved credit standing, reducing the risk of default.

The future of Texas’ housing affordability challenges in its four major cities remains uncertain, while median home prices dropped by 3.4% from May 2022 highs, median home sales price in Texas is just under the average for the U.S., whereas the gap was much wider from 2002 to 2009.

However, Texas metros continue to offer relatively more affordable housing compared to high-cost coastal cities, maintaining their appeal for relocating workers and young residents.

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