Modeling Housing Affordability in Corpus Christi, Texas

Transcription

1 Modeling Housing Affordability in Corpus Christi, Texas December 13, 2018

2 Overview I. Background II. Owner-Occupied Housing Affordability III. Renter-Occupied Housing Affordability IV. Future Housing Needs V. Housing & Neighborhood Quality VI. Conclusion

3 I. Background

4 Demographic Characteristics (2017) City of Corpus Christi Nueces County Population 325, ,221 Households 115, ,490 Median Family Income $63,100 $63,100 Percent of Owner- Occupied Housing Units 57% 58% Percent of Renter- Occupied Housing Units Source: Department of Housing and Urban Development, U.S. Census Bureau 43% 42%

5 Owner-Occupied Housing Stock (2017) Property Type Number of Owner- Occupied Units in the City of Corpus Christi Proportion of Owner- Occupied Units in the City of Corpus Christi Number of Owner- Occupied Units in Nueces County Single-family 82, % 94, % Proportion of Owner- Occupied Units in Nueces County Condominium 3, % 6, % Townhouse 3, % 3, % Total 89, % 104, % Source: Nueces County Appraisal District

6 Spatial Distribution of Owner-Occupied Housing Stock (2017) Source: Nueces County Appraisal District

7 Renter-Occupied Housing Stock (2017) Property Type Number of Renter- Occupied Units in the City of Corpus Christi Proportion of Renter- Occupied Units in the City of Corpus Christi Number of Renter- Occupied Units in Nueces County Proportion of Renter- Occupied Units in Nueces County , % 33, % 5-9 8, % 8, % , % 6, % 50 or more 3, % 4, % Total 49, % 52, % Source: U.S. Census Bureau

8 Spatial Distribution of Renter-Occupied Housing Stock (2017) Source: U.S. Census Bureau

9 Income Cohorts (2017) Income Cohort Extremely Low Income Very Low Income Percent of Median Family Income Income Range Percent of Households in the City of Corpus Christi Percent of Households in Nueces County 0-39% $0 - $24, % 23.6% 40-49% Low Income 50-79% Workforce % $24,601 - $31,050 $31,051 - $49,700 $49,701 - $75, % 6.6% 17.0% 17.4% 19.1% 18.3% Market-rate 121%+ $75, % 34.1% Source: Department of Housing and Urban Development, U.S. Census Bureau

10 Income Cohorts by Housing Type (2017) Income Cohort Income Range Percent of Owner- Occupied Households in the City of Corpus Christi Percent of Renter- Occupied Households in the City of Corpus Christi Percent of Owner- Occupied Households in Nueces County Percent of Renter- Occupied Households in Nueces County Extremely Low Income Very Low Income Low Income Workforce $0 - $24, % 33.6% 15.7% 32.3% $24,601 - $31,050 $31,051 - $49,700 $49,701 - $75, % 9.0% 4.7% 8.9% 13.7% 22.3% 13.4% 21.7% 19.1% 17.3% 19.4% 18.6% Market-rate $75, % 17.8% 46.8% 18.4% Source: Department of Housing and Urban Development, U.S. Census Bureau

11 Median Family Income in Nueces County by Census Tract (2016) Source: U.S. Census Bureau

12 Defining Housing Affordability What does housing affordability measure for owner- and renter-occupied units? Housing Affordability measures the relationship between home price or rent and median family (or household) income.

13 Defining Housing Affordability Owner-Occupied Housing Affordability Median family (or household) income as a percentage of required income to qualify for a mortgage Calculates the required income to qualify for a particular home price based on the total monthly mortgage payment (monthly mortgage payment + additional expenses associated with homeownership) HAI = 1.10 means median income 10% > required income Renter-Occupied Housing Affordability Rent as a percentage of median family (or household) income (Example: Rent is 30% of median income)

14 II. Owner-Occupied Housing Affordability

15 Owner-Occupied Housing Affordability in the Corpus-Christi MSA Decline in owner-occupied affordability following the end of the Great Recession. $200,000 $180,000 $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 Owner-Occupied Housing Affordability in the Corpus-Christi MSA Source: Federal Financial Institutions Examination Council and Real Estate Center at Texas A&M University +39% Widening gap between median home price and median family income diminishes affordability +31% Median Home Price Median Family Income

16 Housing Affordability Index Owner-Occupied Housing Affordability in the Corpus-Christi MSA However, the MSA remains relatively affordable with an HAI above Housing Affordability Index: Corpus-Christi MSA Increasing Affordability Median Income > Qualifying Income Median Income < Qualifying Income Source: Federal Financial Institutions Examination Council and Real Estate Center at Texas A&M University

17 Owner-Occupied Housing Affordability in Corpus Christi vs. Other Geographies While affordability has declined since the end of the Great Recession, Corpus Christi is relatively affordable in comparison to other geographies. Texas Corpus Christi Housing Affordability Index Beaumont- Port Arthur Brownsville- Harlingen McAllen- Edinburg- Mission San Antonio- New Braunfels Victoria Source: Real Estate Center at Texas A&M University

18 Home Price Appreciation in the Corpus Christi MSA Home price appreciation increased significantly following the Great Recession. However, the rate of increase has slowed over the past few years 20% 15% 10% Annual Home Price Appreciation in the Corpus Christi MSA, Historical average: 2.7% Seven-year average ( ): 3.5% 5% 0% -5% -10% Source: Federal Reserve Economic Data

19 Percent of Total Homes Sold Residential Sales Activity in Nueces County Decline in sales of lowest-priced homes ($0-$149,999) Rise in sales of homes priced $150,000+ strains housing affordability for lowerincome households 30% All Residential Sales in Nueces County ( ) 25% 20% 15% 10% 5% $0 - $69,999 $70,000 - $99,999 $100,000 - $149,999 $150,000 - $199,999 $200,000 - $299,999 $300,000 -$399,999 $400,000+ 0% Source: Real Estate Center at Texas A&M University

20 Percent of Total Homes Sold Residential Sales Activity in the City of Corpus Christi Decline in sales of lowest-priced homes ($0-$149,999) Rise in sales of homes priced $150,000+ strains housing affordability for lowerincome households 35% All Residential Sales in the City of Corpus Christi ( ) 30% 25% 20% 15% 10% $0 - $69,999 $70,000 - $99,999 $100,000 - $149,999 $150,000 - $199,999 $200,000 - $299,999 $300,000 - $399,999 $400,000+ 5% 0% Source: Real Estate Center at Texas A&M University

21 Source: Real Estate Center at Texas A&M University Spatial Distribution of All Residential Sales

22 Percent of New Homes Sold New Residential Sales (MLS) Activity in Nueces County Virtually no new construction of lowest-priced homes (less than $99,999) Significant decline in new construction of homes priced $100, ,999 Tremendous growth in new construction of homes priced $200, ,999 60% New Residential Sales Activity in Nueces County ( ) 50% 40% 30% 20% $0 - $69,999 $70,000 - $99,999 $100,000 - $149,999 $150,000 - $199,999 $200,000 - $299,999 $300,000 - $399,999 $400, % 0% Source: Real Estate Center at Texas A&M University

23 Percent of New Homes Sold New Residential Sales (MLS) Activity in the City of Corpus Christi Virtually no new construction of lowest-priced homes (less than $99,999) Significant decline in new construction of homes priced $100, ,999 Tremendous growth in new construction of homes priced $200, ,999 70% New Residential Sales Activity in the City of Corpus Christi ( ) 60% 50% 40% 30% 20% $0 - $69,999 $70,000 - $99,999 $100,000 - $149,999 $150,000 - $199,999 $200,000 - $299,999 $300,000 - $399,999 $400, % 0% Source: Real Estate Center at Texas A&M University

24 Spatial Distribution of New Residential Sales (MLS) Activity Source: Real Estate Center at Texas A&M University

25 Summary Overall, housing remains relatively affordable in Corpus Christi. However, the decline in the supply of new homes in the lowest price ranges diminishes housing affordability, particularly for lowincome households.

26 What Is Affordable?

27 How Much Home Can A Household Afford? (2017) Assumptions: Interest Rate: 4.28% LTV: 89.5% Qualifying Ratio: 39.75% Annual Expenses (Taxes, Property Insurance, and Utilities): 6.00% of Home Value Source: CoreLogic, Real Estate Center at Texas A&M University

28 How Much Home Can A Household Afford? (2017) Family Income Source: CoreLogic, Real Estate Center at Texas A&M University Maximum Home Price Affordable $20,000 $70,357 $30,000 $105,536 $40,000 $140,714 $50,000 $175,893 $60,000 $211,071 $70,000 $246,250 $80,000 $281,429 $90,000 $316,607 $100,000 $351,786

29 How Much Home Can A Family Afford? (2017) Income Cohort Income Range Extremely Low Income Very Low Income Low Income Workforce Range in Maximum Home Price Affordable $0 - $24,600 $0 - $86,539 $24,601 - $31,050 $31,051 - $49,700 $49,701 - $75,720 $86,540 - $109,229 $109,230 - $174,837 $174,838 - $266,372 Market-rate $75,721+ $266,373+ Source: U.S. Department of Housing and Urban Development, CoreLogic

30 Supply and Demand of Owner-Occupied Housing in Nueces County Based on Total Housing Stock (2017) Income Cohort Family Income Range of Maximum Home Price Affordable Percent of Owner- Occupied Households Percent of Owner- Occupied Units Over or (Under) Supply Extremely Low Income $0 - $24,600 $0 - $86, % 22.9% 6,892 Very Low Income $24,601 - $31,050 $86,540 - $109, % 9.7% 5,046 Low Income $31,051 - $49,700 $109,230 - $174, % 30.5% 17,515 Workforce $49,701 - $75,720 $174,838 - $266, % 22.8% 3,855 Market-rate $75,721+ $266, % 14.2% (33,307) Source: U.S. Department of Housing and Urban Development, CoreLogic, Nueces County Appraisal District, Real Estate Center at Texas A&M University

31 Supply and Demand of Owner-Occupied Housing in the City of Corpus Christi Based on Total Housing Stock (2017) Income Cohort Family Income Range of Maximum Home Price Affordable Percent of Owner- Occupied Households Percent of Owner- Occupied Units Over or (Under) Supply Extremely Low Income $0 - $24,600 $0 - $86, % 21.6% 5,251 Very Low Income $24,601 - $31,050 $86,540 - $109, % 10.1% 4,804 Low Income $31,051 - $49,700 $109,230 - $174, % 32.8% 17,356 Workforce $49,701 - $75,720 $174,838 - $266, % 23.7% 3,915 Market-rate $75,721+ $266, % 11.8% (31,326) Source: U.S. Department of Housing and Urban Development, CoreLogic, Nueces County Appraisal District, Real Estate Center at Texas A&M University

32 But wait!

33 Supply and Demand of Owner-Occupied Housing in Nueces County Based on MLS Sales (2017) Income Cohort Family Income Range of Maximum Home Price Affordable Percent of Owner- Occupied Households Percent of Owner- Occupied Units Over or (Under) Supply Extremely Low Income $0 - $24,600 $0 - $86, % 9.6% (6,951) Very Low Income $24,601 - $31,050 $86,540 - $109, % 6.4% 1,648 Low Income $31,051 - $49,700 $109,230 - $174, % 27.0% 13,836 Workforce $49,701 - $75,720 $174,838 - $266, % 32.6% 14,076 Market-rate $75,721+ $266, % 24.4% (22,608) Source: U.S. Department of Housing and Urban Development, CoreLogic, Nueces County Appraisal District, Real Estate Center at Texas A&M University

34 Supply and Demand of Owner-Occupied Housing in the City of Corpus Christi Based on MLS Sales (2017) Income Cohort Family Income Range of Maximum Home Price Affordable Percent of Owner- Occupied Households Percent of Owner- Occupied Units Over or (Under) Supply Extremely Low Income $0 - $24,600 $0 - $86, % 9.8% (5,335) Very Low Income $24,601 - $31,050 $86,540 - $109, % 6.7% 1,782 Low Income $31,051 - $49,700 $109,230 - $174, % 28.6% 13,624 Workforce $49,701 - $75,720 $174,838 - $266, % 34.7% 13,744 Market-rate $75,721+ $266, % 20.2% (23,815) Source: U.S. Department of Housing and Urban Development, CoreLogic, Nueces County Appraisal District, Real Estate Center at Texas A&M University

35 Summary Affordability: The highest income cohort faces a supply shortage of owner-occupied units. This would suggest that households in the highest income cohort are buying down i.e., they are purchasing lower-priced homes. Availability: The lowest and highest income cohorts face a supply shortage of owner-occupied units. The lowest income cohort must spend relatively more to purchase a home.

36 Where Is the Supply of Housing by Income Cohort?

37 Spatial Distribution of Homes Affordable to Each Income Cohort (2017) Source: Nueces County Appraisal District

38 Spatial Distribution of Homes Affordable to Each Income Cohort (2017) Source: Nueces County Appraisal District

39 Where Do Homebuyers Purchase Homes?

40 Type of Loan Home Purchase Originations in Nueces County ( ) Number of Loans Percent of Loans Median Loan Amount Median Applicant Income Estimated Median Priceto-Income Multiplier Conventional 10,752 52% $161,000 $90, FHA-insured 6,294 30% $151,000 $63, FSA/RHSguaranteed VAguaranteed % $86,000 $52, ,671 18% $198,000 $78, Total 20,727 $164,480 $79, Source: Consumer Financial Protection Bureau Average loan-to-value ratio: 89%

41 Home Purchase Originations in Nueces County by Income Category ( ) Majority of home purchase originations are for market rate housing (households earning greater than 120% of the median family income) In essence, homeownership is not an option for extremely low or very low income households (households earning less than 50% of the MFI) Income Cohort Number of Home Purchase Originations Percent of Home Purchase Originations Extremely Low Income % Very Low Income % Low Income 2, % Workforce 5, % Market-rate 12, % Source: Consumer Financial Protection Bureau

42 Source: Consumer Financial Protection Bureau Home Purchase Originations by Census Tract (2017)

43 III. Renter-Occupied Housing Affordability

44 An Overview of Renter-Occupied Housing Affordability The Department of Housing and Urban Development (HUD) defines cost-burdened households as those who spend more than 30% of their income on rent. We have adopted this methodology into our calculations of renter-occupied housing affordability.

45 How Much Rent Can A Family Afford? (2017) Income Cohort Family Income ($) Monthly Rent Affordable ($) Extremely Low Income $0 - $24,600 $0-$615 Very Low Income $24,601 - $31,050 $616-$776 Low Income $31,051 - $49,700 $777-$1,243 Workforce $49,701 - $75,720 $1,244-$1,893 Market-rate $75,721+ $1,894+ Median rent in Corpus Christi: $970 Source: Department of Housing and Urban Development

46 Supply and Demand of Renter-Occupied Housing in Nueces County (2017) Income Cohort Family Income Monthly Rent Affordable Percent of Renter- Occupied Households Percent of Renter- Occupied Units Over or (under)supply Extremely Low Income Very Low Income Low Income Workforce $0 - $24,600 $0-$ % 20.5% (6,892) $24,601 - $31,050 $31,051 - $49,700 $49,701 - $75,720 $616-$ % 14.1% 2,692 $777-$1, % 34.4% 6,359 $1,244-$1, % 23.2% 3,112 Market-rate $75,721+ $1, % 7.8% (5,271) Source: U.S. Census Bureau, Department of Housing and Urban Development Source: Department of Housing and Urban Development, U.S. Census Bureau

47 Supply and Demand of Renter-Occupied Housing in the City of Corpus Christi (2017) Income Cohort Family Income Monthly Rent Affordable Percent of Renter- Occupied Households Percent of Renter- Occupied Units Over or (under)supply Extremely Low Income Very Low Income Low Income Workforce $0 - $24,600 $0-$ % 19.8% (6,148) $24,601 - $31,050 $31,051 - $49,700 $49,701 - $75,720 $616-$ % 14.2% 2,619 $777-$1, % 34.4% 6,216 $1,244-$1, % 23.7% 2,469 Market-rate $75,721+ $1, % 7.9% (5,156) Source: U.S. Census Bureau, Department of Housing and Urban Development Source: Department of Housing and Urban Development, U.S. Census Bureau

48 IV. Future Housing Needs

49 Population Growth The expected population of Nueces County is 374,157 people by 2020 and 407,534 people by 2030 (average annual growth of 0.89 percent). Since 2005, the average household size has hovered between 2.64 and Assuming an average household size of 2.71, the County needs, on average, 1,230 additional housing units each year to keep pace with population growth. Over the past seven years (since the recovery from the Great Recession), building permits averaged 1,441 annually. Source: Texas Water Development Board

50 Number of Permits Building Permits in Nueces County Single family units Multifamily units Source: U.S. Census Bureau

51 Single-Family Median Lot Size Fairly Constant 10,000 Median Lot Size (SF) by Year Built 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - YEAR BUILT Source: Nueces County Appraisal District

52 Increase in Single-Family Median Living Area 2,500 Median Living Area (SF) by Year Built 2,000 1,500 1, YEAR BUILT Source: Nueces County Appraisal District

53 What Does This Mean? Median Single-family Lot Size Since 1992 builders have reduced median lot by 1,121 SF 1992: 7,983 SF 2016: 6,862 SF (-14.0%) Median Single-family Living Area Since 1992 builders have increased median living area by 206 SF 1992: 1,746 SF 2016: 1,952 SF (11.8%) To supply affordable housing, builders may have to reduce lot size or living area.

54 V. Housing & Neighborhood Quality

55 But Wait! Thus far, we have ignored housing and neighborhood quality. However, just because a home is affordable does not mean that it is of adequate quality or that it is located in a neighborhood with access to good schools, jobs, healthcare, amenities, etc. Housing and neighborhood quality is more likely to be an issue for lower-income households.

56 Why Is This Topic Important? Place matters: the neighborhood in which a household resides significantly effects the opportunities and life outcomes of that household. Homeownership in high-quality neighborhoods, which offer households access to better schools, jobs, health care, and amenities and reduces exposure to crime, is more likely to enhance the opportunities and life outcomes of that household. However, low-income households are less likely to be able to afford homeownership in high-quality neighborhoods.

57 Neighborhood Matters Lowincome household Limited financial resources, lower educational status Resides in a neighborhood of poor quality Resides in a high-quality neighborhood Faces lower access to good schools, jobs, and health care; higher exposure to crime Faces greater access to good schools, jobs, and health care; lower exposure to crime Fewer opportunities for upward mobility; lower household outcomes More opportunities for upward mobility; improved household outcomes

58 Age of Owner-Occupied Housing Source: Nueces County Appraisal District

59 Age of Owner-Occupied Housing Source: Nueces County Appraisal District

60 Travis County - Land Value & Location MEDIAN LAND VALUE PSF $45.0 $40.0 $35.0 $30.0 $25.0 $20.0 $15.0 $10.0 $5.0 $0.0 Single Family 2017 Appraised Value By Year Built MEDIAN IMPROVEMENT VALUE PSF $140 $120 $100 $80 $60 $40 $20 $0 Median Land Value PSF Median Improvement Value PSF

61 Travis County - Land Value & Location Single Family Land >= $25 PSF Single Family Land < $7 PSF

62 Nueces County - Land Value & Location MEDIAN LAND VALUE PSF $5.0 $4.5 $4.0 $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 Single Family 2017 Appraised Value By Year Built MEDIAN IMPROVEMENT VALUE PSF $120 $100 $80 $60 $40 $20 $0 Median Land Value PSF Median Improvement Value PSF

63 Nueces County - Land Value & Location Single Family Land >= $4 PSF Single Family Land < $3 PSF

64 Summary Gentrification makes housing unaffordable for longtime residents with lower income In Corpus Christi: Higher value homes are located next to water or in the suburbs. Lower value homes are located near downtown close to the most jobs Increasing the housing quality and access to opportunities (i.e., good schools, jobs, healthcare) of homes close to downtown could improve household outcomes for low-income households.

65 VI. Conclusion

66 Final Thoughts Huge strain on housing affordability for the lowest income cohort (extremely low income families). Declines in the construction of new single-family homes affordable to the lowest-income cohort will worsen affordability. Highest priced homes are in the suburbs. Final thought: how can we increase the supply of affordable housing while enhancing neighborhood quality?

67 Thank you!