A search on Zillow’s website or mobile app for single-family homes for sale in San Antonio yields a sea of red dots on a map, each representing a listing.
But if you modify the search parameters to find homes with a maximum price of $200,000, most of those dots disappear.
The number of homes sold for under $200,000 in Texas’ four major metropolitan areas has plummeted over the last decade, data from the Texas Real Estate Research Center at Texas A&M University shows.
Sales of homes ranging from $200,000 to $299,999 had been rising for years but began falling during the COVID-19 pandemic as demand and costs soared and inventory tightened.
The decline in the supply of lower-priced homes means a higher proportion of potential buyers will have to postpone homeownership, said Clare Losey, assistant research economist at the Real Estate Research Center.
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It will take more time to save money for a down payment and to reach the income level needed to qualify for a higher-priced home, Losey said.
Higher mortgage rates also pose a challenge for would-be buyers who cannot meet the debt-to-income ratios required to qualify for loans at higher rates.
“Over the long term, this trend in the decline in affordable homes is not only going to affect the viability and potential for homeownership for first-time buyers, lower-income buyers, younger buyers. … It’s also going to lead to broader wealth disparities,” Losey said.
Below $200K less OK
In the San Antonio area, the percentage of homes sold that cost less than $200,000 fell from 69.3 percent in 2011 to 11 percent in 2022.
It declined from 66.4 percent to 5 percent in the Dallas metro area, from 53.6 percent to 0.5 percent in the Austin metro area and from 64.8 percent to 10 percent in the Houston metro area during the same time frame.
The number of homes sold for $200,000 to $299,999 had been steadily increasing in all four metros but started dipping in 2020.
Losey attributes the trend to several factors.
Texas’ population has soared, especially in the state’s four major metros. And with it, demand for homes and prices have surged, particularly during the pandemic as mortgage rates plunged and inventory shrunk.
People living outside Texas flocked here during the pandemic, increasing competition for homes, Losey said. Some came from pricier areas and could afford to spend more than their counterparts here.
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Meanwhile, less available land to be developed and rising construction, labor and regulatory costs, such as minimum lot sizes, “have diminished the ability of builders to meet the demand,” Losey said.
If a project’s costs exceed the returns builders seek, it will become infeasible to them, she said.
“It’s not that they couldn’t hypothetically produce homes in that (lower) price range,” Losey said. “It’s that they’d be sacrificing their expected return on it.”
NIMBYism — a term based on the phrase “not in my backyard” that’s used to describe certain residents who fight development near them — also plays a role.
Residents may only want single-family homes, not multifamily properties, or no additional units in their neighborhood.
“When you’re artificially constraining density to that degree, you’re also raising the price of a home,” Losey said.
Change needed to boost supply
The trends are unlikely to change unless significant measures are implemented to reduce regulatory costs and facilitate higher densities and greater variety of housing, she said. Down payment assistance programs can also prove helpful to buyers trying to qualify for loans.
Texas is still growing, and builders are still grappling with rising costs. Price growth has moderated as mortgage rates increase, but there has not been a substantial decline in prices, Losey said.
“Unless we see some sort of significant shift in terms of the types of housing, density, etc., that we’re allowing, it’s going to be really difficult for builders to supply homes on the ground in those price ranges,” Losey said.
Builders are also pulling back, concerned about whether they will have buyers.
Permits for new single-family homes in San Antonio soared in recent years but have been falling month over month since June, data from the Real Estate Research Center shows.
About 1,610 permits were filed in fourth quarter 2022, down from 2,767 permits during the same period in 2021.
“Less construction now of course means less supply down the line,” Losey said. “That’ll contribute to the affordability constraints.”
madison.iszler@express-news.net
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