Homebuying Blues

Texas named one of the worst states for first-time homebuyers

The dream of home ownership might be out of reach for young Texans.

Photo courtesy of Austin Board of Realtors

Here's some depressing news: It seems the states that are attracting the most millennials are also the ones where it's hardest to break into homeownership. Bankrate looked at several different housing and financial factors and determined that Texas is the seventh worst state in the nation for first-time homebuyers.

Measuring each state's housing affordability, job market for young adults, housing market tightness, credit availability, and homeownership among the under-35 crowd, the personal finance website placed the Lone Star State in the bottom half for each metric except job markets. At least we're doing okay there.

We share the distinction of "10 worst" with a lot of places that are known for their major metropolitan areas, such as New York, Massachusetts, and last-place finisher California.

"When you have a state like California where the housing prices are really high and the rental housing is also really expensive, unless you have access to wealth from some source that's not your job, it's going to be really hard for you to amass enough of a down payment, and also the kind of credit that you need to get into the housing market," says Rolf Pendall, co-director of the Metropolitan Housing and Communities Policy Center at the Urban Institute.

He might as well be referencing Texas too, as our surging rents are making it difficult to save for a home. And since we're also in the bottom three for market tightness, the smaller pool of available houses and the bidding wars that often erupt between buyers make it extra tough to snag a home even if you do have that lump sum ready to go.

"Tight market conditions and unaffordably high prices really plague what many young Americans feel are the most desirable places to put down roots," says Bankrate.com analyst Claes Bell in a release. "On the other hand, the availability of FHA loans that allow down payments of as little as 3.5 percent may make it easier to buy a home in high-priced markets than you think."

But if young folks are feeling priced out of home ownership here and on the coasts, where should they head? The Midwest. Iowa, Utah, Minnesota, Kansas, and Missouri are the five most affordable states right now for the under-35 set.

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Homebuyers can afford to be picky as Austin housing inventory rises

Photo by Avinash Kumar on Unsplash

Housing economist Clare Losey said the most significant factor affecting home sales in Austin is high mortgage rates.

The latest real estate report from Unlock MLS and the Austin Board of Realtors (ABoR) has revealed housing inventory is still on a steady rise in the Austin-Round Rock-San Marcos MSA, creating more choices for potential homebuyers as they navigate a high interest rate market.

Residential home sales dipped by a mere 1.5 percent year-over-year from October 2023, amounting to 2,248 closed sales in the Austin-Round Rock-San Marcos MSA. Median prices have also dropped to $430,000, or 3.2 percent less than this time last year. More than 3,300 new home listings were added on the market — a 7.4 percent increase from 2023 — bringing the total number of active home listings to 11,599.

According to Unlock MLS and ABoR housing economist Clare Losey, Ph.D., October's mortgage rates stood at 6.4 percent and are showing no signs of a significant drop in the near future. Even heading into 2025, Losey says potential homebuyers who are biding their time in the hopes of seeing rates plummet "may be in for a long wait."

"In the meantime, sellers must recognize that bringing buyers to the table requires a more aggressive pricing approach," Losey said. "Even in a more balanced market, buyers with limited purchasing power are struggling to meet current price expectations."

As for the overall health of the Central Texas housing market, 2024 Unlock MLS and ABoR president Kent Redding labeled recent news reports that called Austin "ground zero" for a downturn as an "extreme over-exaggeration."

"Austin led the state and nation in record-breaking home price growth and sales activity during the pandemic," Redding said. "For three years, near-zero housing inventory, numerous offers above list price and a rapid-paced market raised home prices and left little negotiating power for buyers. During this record-setting growth, ABoR and Unlock MLS consistently emphasized the unsustainability of the rapid growth, and now, our market is working to balance those extremes."

Central Texas housing trends in October 2024

In Travis County, 979 homes were sold last month — a slight 2.5 percent increase from last year. Median prices remained flat year-over-year at $510,000. Active home listings continued growing to 5,702 homes, which is 9.4 percent more year-over-year.

In Williamson County, 807 homes were sold in October, with median prices steadily dropping to $420,000. There were 1,028 new home listings on the market, showing a 4.5 percent increase from October 2023, bringing the total number of active home listings to 3,369.

Residential home sales dropped by nearly eight percent in Hays County in October, totaling 315 sales. Median prices also fell 5.5 percent year-over-year to $359,000. Active listings rose 6.6 percent year-over-year to 1,740 homes with the addition of 534 new listings on the market.

Meanwhile, 114 homes were sold in Bastrop County last month, which is 4.4 percent more than this time last year. Median prices dropped by a single percentage point year-over-year to $355,000. There were 654 active listings on the market in October, and 152 new home listings, representing a 1.3 percent slip in new inventory when compared to last year.

Only 33 homes were sold in Caldwell County in October to reflect a near 14 percent decline year-over-year from October 2023. Median prices fell to $262,990, which was a 13.5 percent decrease from last year. There were 136 active homes on the market last month, and 40 new homes added on the market.

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