The cost of land itself is another factor.
“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 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.
Again, however, this is primarily a phenomenon of the state’s largest metropolitan areas, as recent price data indicate (Exhibit 1).
Exhibit 1: Median Prices, New and Existing Single-Family Homes, 2017
Source: Texas A&M Real Estate Center
Perhaps unsurprisingly, the booming Austin-Round Rock area had the highest median home price in 2017, at $299,900.
But while Austin has the highest median price, it hasn’t seen the fastest price increase. That distinction falls to 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.
Exhibit 2: Fastest Growth in Median Price of Single-Family Housing, Texas Metro Areas, 2011-2017
*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
Exhibit 2 excludes only one of the state’s five largest metro areas, McAllen-Edinburg-Mission. This border-area community offers some of the state’s most affordable single-family homes, with a median price of $139,900 in 2017. But even its median price has risen fairly briskly, at 30.6 percent between 2011 and 2017.
It’s worth noting, however, 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
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.
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. According to a recent study by Harvard University’s Joint Center for Housing Studies, 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.
The Austin, DFW and Houston metro areas currently have the highest median monthly rents in Texas (Exhibit 3), 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
High housing costs 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 more. 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.
Exhibit 3: Estimated Median Monthly Gross Rents in Texas Metro Areas, 2016
*Metropolitan Statistical Area as defined by the federal government.
Source: U.S. Census Bureau
Exhibit 4: Ten Fastest-Growing Median Monthly Gross Rents, 2011-2016
*Metropolitan Statistical Area as defined by the federal government.
Source: U.S. Census Bureau
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 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.
Housing experts’ opinions vary on the extent of Texas’ future housing challenges, but economic growth and population increases will put continuing upward pressure on the state’s home prices and rents. If Texas wants to maintain its overall reputation for a low cost of living, state and local policymakers must consider the factors driving price increases — and act on those they can influence. FN
Related:
- North Texas Eases Silicon Valley's Housing Squeeze (January 2018)
- Texas Toasts:A Roundup of Bright Economic News in Texas (April 2018)
- Gone To Texas: Migration (October 2017)
- “Dark Store Theory” and Property Taxation (February 2017)
- Millennials – The New Normal (October 2016)
FAQs
While Texas home prices are not predicted to increase as quickly or as sharply as they did in 2021 and early 2022, when mortgage rates were low, buyer demand remains robust and is unlikely to diminish. Overall, the Texas housing market will likely continue robust, although not to the same extent as in 2021.
Why are houses in Texas so expensive? ›
The 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.
Is the housing market in Texas high? ›
According to the most recent data from Texas Realtors, the median home sale price across the state was $345,000 in Q3 2022. That number is up 11.3 percent from the same time the previous year, but still more than $25,000 cheaper than the current national median sale price of $370,700.
Is there a shortage of housing in Texas? ›
In 2019, according to one estimate, Texas needed 330,000 more homes than it had — a shortage second only to California. That need has grown in the last two years as hundreds of thousands of new residents flocked to the state.
Will rent go down in 2023 Texas? ›
While there's no consensus on what rents will do exactly in 2023 — go up a little, go down a little, or stay flat, according to three forecasts — what's clear is they are expected to return to more normal growth patterns, instead of the unsustainable, record rates seen in 2021 and 2022.
Why are houses so cheap in Texas right now? ›
The cost of living is affordable, the state has low tax rates, and it has a strong economy. These reasons and more make Texas a cheap state and a great place to live. What is this?
Is it worth it to buy a house in Texas? ›
Texas real estate can be a great investment. Whether you're searching for your forever home or you're a first-time home-buyer looking for a starter home or you're interested in investment rental opportunities, the opportunity for a solid return on investment (ROI) is – like everything in Texas – big!
Is it actually cheaper to live in Texas? ›
Texas is actually one of the more affordable states in the country. Compared to national averages, living expenses here tend to be cheaper — though how much cheaper varies based on where you choose to live in the state.
Are houses more expensive in California or Texas? ›
The cost of a home in Texas is drastically cheaper than owning a home in California. The average cost of a home in the U.S. is $231,000. A home costs 60% more in California compared to Texas. In Texas, the median home price is only $195,000, which is lower than the national average.
What is the hottest real estate market in Texas? ›
Top 5 Hottest Markets for Texas Commercial Real Estate in 2022
- Austin. Over the past few years, Austin has remained a booming commercial real estate investment activity center. ...
- Dallas. The Crowdstreet report ranked the Dallas/Ft. ...
- Fort Worth. ...
- San Antonio. ...
- Houston.
Cities with the most expensive homes in Texas
- Austin-Round Rock-Georgetown, TX: 12.
- Dallas-Fort Worth-Arlington, TX: 11.
- San Antonio-New Braunfels, TX: 4.
- Houston-The Woodlands-Sugar Land, TX: 1.
Driving the news: Average home prices in greater Austin have fallen by more than 10% between July 2022 — when the market peaked — and April 2023, according to the Zillow Home Value Index.
Are Texas home prices going to drop? ›
Texas is expected to see a decrease in home prices by nearly 20%. Mortgage Rates Have Almost Doubled: Mortgage rates almost doubled from April 2021's 3.12% to 6.79% for the month of June, 2023.
Why is Texas rent so high? ›
Renters are seeing their housing costs jump as population increases, strict zoning regulations and rising home sales push up rent prices.
What are houses going for in Texas? ›
There are currently 120,411 homes for sale in Texas. The median list price in Texas is $399,900 and the average price per square foot is $181.
Will there be a housing crisis in 2023? ›
It's also worth noting that while foreclosure rates are up year-over-year, experts do not expect to see a wave of foreclosures in 2023, even where home values are depreciating, as many homeowners have substantial equity due to progressive home price appreciation in recent years.
How high can rent be increased in Texas? ›
There is no statewide rent increase limit in Texas, which means landlords are legally allowed to raise the rent as much as they like. Tenants can renegotiate or find other housing, but no legislation limits how much landlords can charge in rent.
Will there be a housing recession in 2023? ›
Demand for homes remains high, and there are fewer home sellers than there were in 2022. And while the market is cooling, experts don't expect an actual housing crash or a housing bubble burst in 2023.
Which city has cheap houses in Texas? ›
Most Affordable Places to Live in Texas
- Brownsville.
- El Paso.
- Galveston.
- Harlingen.
- Lewisville.
- McAllen.
- Temple.
Texas is 3.6% cheaper than Georgia.
Average Annual Per-Capita Cost in Texas
That's $3,760 a month, per person, on average.
What month are houses cheapest? ›
Winter is usually the cheapest time of year to purchase a home. Sellers are often motivated, which automatically translates into an advantage to you. Most people suspend their listings from around Thanksgiving to the New Year because they assume buyers are scarce.
Is building a house cheaper than buying in Texas? ›
In Texas specifically, the median sales price for a home in Texas is around $218,000, while the median price for constructing a new home is $286,000. This means that for the same price you could end up getting a much larger home if you choose to not build a new house.
Are houses in Texas cheaper than Florida? ›
Owning a home in Texas is much cheaper than owning a home in Florida, as their housing cost indices showed in the previous section. Texas's index was 83.5 (16.5% below the U.S. overall), while Florida's was 99.6 – not bad, but much higher than Texas's.
What part of Texas is cheapest to live? ›
- Breckenridge. The cheapest place to live in Texas is Breckenridge. ...
- Beaumont. The second cheapest city in Texas is Beaumont. ...
- Wichita Falls. Located in north-central Texas, Wichita Falls is a cheap destination for nature lovers. ...
- Harlingen. ...
- Texarkana. ...
- Abilene. ...
- Amarillo. ...
- Odessa.
What's considered a “good” salary in Texas depends on your household size and lifestyle, but most Texans make between $45K and $100K annually. Texas cities have differing costs of living, of course — Austin is much pricier than Amarillo — so where you live in the Lone Star State also matters.
What salary do you need to live comfortably in Texas? ›
According to the study, a North Texas resident without children would need to make $64,742 after taxes to live comfortably. The study is based on the MIT Living Wage Calculator, which uses the cost housing, food, transportation, medical care and more.
What city in Texas has the most expensive houses? ›
Webster, Texas, is one of the state's most expensive places to live, with a cost of living that's 34% higher than the national average. This city is located in Harris County and has a median home value of $379,065.
What state has the highest housing cost? ›
Hawaii. Hawaii is truly a paradise, but it is also the most expensive state in America to live in. The cost of living in Hawaii overall is 86% higher than the national average, and the cost of housing in Hawaii is a jaw-dropping 207% above the national average.
What state has the most expensive properties? ›
1. Hawaii. Hawaii is known for its beautiful beaches, warm climate, and breathtaking scenery. However, it is also the most expensive state to buy a house, with a Zillow Home Value Index of $834,582.
Affordable property values: San Antonio is known for its affordable property values, making it an attractive option for investors looking to buy rental properties in Texas. The city's low cost of living and strong job market also contribute to its real estate investment appeal.
Where are the most houses being built in Texas? ›
Texas metros dominated the ranking for housing construction once again in 2022, with Dallas-Fort Worth and the Houston area leading the nation in new housing units.
Which city in Texas has the best real estate market? ›
1 on best US housing markets for growth, stability list. AUSTIN (KXAN) — According to a new study, 12 of the top 20 U.S. cities that ranked as being the best housing markets for growth and stability were in Texas, and six Texas cities made the top 10.
What part of Texas has the nicest homes? ›
1. Waco, Texas. Waco, population 135,858, is the best city for the real estate investor to buy a house in Texas, according to our study.
What city is most expensive in Texas? ›
Austin is the most expensive city in Texas for a night out, and 3rd priciest in the U.S. - CultureMap Austin.
Where is the biggest house in Texas? ›
Chateau Montclair, as it's known, is the largest home in Texas. This extravagant estate home sits on nearly six acres in Prosper and has a perfect view of a ten-acre lake.
Is Austin housing a bubble? ›
The Austin market is “arguably the largest housing bubble in America based on the fundamental data,” Reventure Consulting CEO Nicholas Gerli said in May. While it takes about five years for a market to crash, Gerli predicted a 30 percent to 40 percent decline in home prices in Austin over the next three years.
Will home prices drop in 2023 Austin? ›
Austin-Round Rock Metro's home values are expected to drop by 1.4% between March 2023 and March 2024. According to their forecast, the supply and demand dynamics will likely push down prices over the next 12 months.
Is Austin still booming? ›
Austin's population increased 33 percent between 2010 and 2020, and its booming job market makes it one the top places for migrating talent.
Will mortgage rates drop in 2024? ›
Fannie Mae, Mortgage Bankers Association and National Association of Realtors expect mortgage rates to drop through the first quarter of 2024, by half a percentage point to about nine-tenths of a percentage point. Figures are the predicted quarterly average rates for the 30-year fixed-rate mortgage.
Homeowners owe more on their mortgages than their homes were worth and can no longer just flip their way out of their homes if they cannot make the new, higher payments. Instead, they will lose their homes to foreclosure and often file for bankruptcy in the process.
Are house prices dropping in Houston? ›
In a new report released Wednesday, the Houston Association of Realtors said home prices dipped more than 18% last month compared to the same month in 2022.
Where do people rent the most in Texas? ›
According to a recent Census Bureau report on “predominately renter” cities, College Station is at number one nationally, with nearly 60 percent of its residents in rental housing. Killeen ranks third at 56 percent. “Texas is a young state in terms of demographics,” says Dr.
Is rent cheaper in Texas than California? ›
Benefits of Moving From California to Texas
Housing costs are a huge issue in California—the average cost of rent for an apartment is $1,600, while the average cost in Texas is a little over $1,000. Additionally, mortgages and home costs are much lower in Texas.
Why is Texas housing cheaper than California? ›
One reason contributing to a lower cost of living and affordable housing is that Texas has no state income tax. Texas is one of seven states in the U.S. to not have an income tax. In comparison, as of 2022, the states with the highest income tax rate are Minnesota (9.85%), New York (10.90%), and California (13.30%).
Is housing unaffordable in Texas? ›
“The Gap” report ranks Texas the sixth-worst state in the U.S. for affordable housing. Austin, Dallas and Houston rank third, fourth and fifth for worst metropolitan areas in the country.
Is the housing market cooling in Texas? ›
Texas real estate market is cooling as prices remain similar to 2022.
Are house prices going to drop in Texas? ›
House prices will steadily decline in some areas, while mortgage rates will remain high overall. Despite some states seeing house prices starting to fall, purchasing power will continue to decline in 2023 due to increased interest rates, leaving the demand for housing at a similar rate to 2022.
Are home prices expected to drop in Texas? ›
Texas is expected to see a decrease in home prices by nearly 20%. Mortgage Rates Have Almost Doubled: Mortgage rates almost doubled from April 2021's 3.12% to 6.79% for the month of June, 2023.
How much does property value increase each year Texas? ›
The appraised home value for a homeowner who qualifies his or her homestead for exemptions in the preceding and current year may not increase more than 10 percent per year.
Average Cost of Living in Texas: $45,114 per year
According to 2021 data from the Bureau of Economic Analysis the average total personal consumption cost in Texas is $45,114 per year. Here's how that breaks down. That's $3,760 a month, per person, on average.
Are land prices going down in Texas? ›
Average cropland value in Texas has been on a steady upward trajectory — and has nearly doubled since 2009. That year, average cropland value was $2,640/acre. That total value has climbed to an average of $5,050/acre in 2022, according to the Texas Real Estate Research Center.
How much does a house appreciate in 10 years? ›
Average Home Value Increase Per Year
National appreciation values average around 3.5 to 3.8 percent per year. Ownerly explains that the average home appreciation per year is based on local housing market trends as well as the economy, and this makes for a great deal of fluctuation.
At what age do you stop paying property taxes in Texas? ›
Property Tax and Appraisals
The Texas Tax Code, Section 33.06, allows taxpayers 65 years of age or older to defer their property taxes until their estates are settled after death.
Do property taxes go up every year in Texas? ›
Texas Property Tax Code Sec 23.23 limits increases of the total assessed value (assessed value = market value minus any exemption value minus current year cap value), to 10% from year to year if the property is under homestead exemption. This 10% increase excludes any new improvements added by the property owner.
Who is exempt from paying property taxes in Texas? ›
To qualify for the general residence homestead exemption an individual must have an ownership interest in the property and use the property as the individual's principal residence. An applicant is required to state that he or she does not claim an exemption on another residence homestead in or outside of Texas.
What is a good salary to live in Texas? ›
With that in mind, a good salary in Texas is between $55K and $73K. To live comfortably anywhere, it helps to track your spending and saving with SoFi Insights. The free budget app also provides credit score monitoring.
What's the cheapest place to live in Texas? ›
- Breckenridge. The cheapest place to live in Texas is Breckenridge. ...
- Beaumont. The second cheapest city in Texas is Beaumont. ...
- Wichita Falls. Located in north-central Texas, Wichita Falls is a cheap destination for nature lovers. ...
- Harlingen. ...
- Texarkana. ...
- Abilene. ...
- Amarillo. ...
- Odessa.
The nation's median household income was $70,784 in 2021, according to census data. In Texas, you need to make between $44,865 and $133,926 to fall into middle class.
