As interest rates rise, the cost of housing in Texas is becoming increasingly difficult for homeowners to manage. This is due to a variety of factors, including a lack of qualified construction workers after the housing crash of the Great Recession, increased commuting distances, and stricter credit criteria for buyers. To keep Texas' reputation for having a low cost of living, state and local legislators must consider the factors that drive price increases and act on those they can influence. The rising costs associated with construction have made it difficult and less cost-effective for home builders to develop moderately priced housing.
This has led to fewer buyers available due to stricter credit criteria, resulting in an increase in home inventories or longer selling times. Texas' leading economic index recently ended its post-pandemic expansion streak and closed lower for the third consecutive month. Now many potential buyers are looking for new homes, but believe that buying has become too aggressive in Texas and are considering making big moves. While housing affordability in Texas remains favorable compared to other states, high housing costs in some regions force many households to make significant concessions. Texas ranks first among the 50 states and the District of Columbia in terms of percentage increase in paid non-agricultural employment over the past 12 months.
This could explain why the unemployment rate in Texas is often equal to or lower than the national average, despite a weak labor market. The opinions of housing experts vary as to the magnitude of Texas' future real estate challenges, but economic growth and population growth will place continued upward pressure on housing prices and rents in the state. According to the most recent report from the Texas Real Estate Research Center at Texas A&M University, record prices and rising mortgage rates have deterred buyers. As a result, single-family housing construction is moving away from “entry-level housing” and is leaning towards larger, more expensive, and cost-effective housing. Additionally, many cities in Texas have reacted to rapid growth by enacting strict zoning codes (ordinances that control land use and construction) that eliminate tracts of land from development, raising demand and prices. The stock of entry-level housing is more limited in the state's major metropolitan areas, although a large number of homes are available at higher prices.
To keep up with the ever-increasing demand for housing in Texas, state and local legislators must consider all factors that contribute to rising house prices. This includes a lack of qualified construction workers after the Great Recession, increased commuting distances, stricter credit criteria for buyers, rising costs associated with construction, record prices and rising mortgage rates, as well as zoning codes that eliminate tracts of land from development. By taking into account these factors and acting on those they can influence, legislators can help ensure that Texans continue to enjoy a low cost of living.
