Modeling Housing Affordability in Corpus Christi, Texas December 13, 2018
Overview I. Background II. Owner-Occupied Housing Affordability III. Renter-Occupied Housing Affordability IV. Future Housing Needs V. Housing & Neighborhood Quality VI. Conclusion
I. Background
Demographic Characteristics (2017) City of Corpus Christi Nueces County Population 325,600 361,221 Households 115,797 128,490 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%
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 82,996 92.6% 94,505 90.6% Proportion of Owner- Occupied Units in Nueces County Condominium 3,620 4.0% 6,352 6.1% Townhouse 3,042 3.4% 3,491 3.3% Total 89,658 100.0% 104,348 100.0% Source: Nueces County Appraisal District
Spatial Distribution of Owner-Occupied Housing Stock (2017) Source: Nueces County Appraisal District
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 1-4 30,427 61.7% 33,415 63.5% 5-9 8,630 17.5% 8,733 16.6% 10-49 6,259 12.7% 6,447 12.3% 50 or more 3,977 8.1% 4,014 7.6% Total 49,293 100.0% 52,609 100.0% Source: U.S. Census Bureau
Spatial Distribution of Renter-Occupied Housing Stock (2017) Source: U.S. Census Bureau
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 - $24,600 22.9% 23.6% 40-49% Low Income 50-79% Workforce 80-120% $24,601 - $31,050 $31,051 - $49,700 $49,701 - $75,720 6.5% 6.6% 17.0% 17.4% 19.1% 18.3% Market-rate 121%+ $75,721+ 34.5% 34.1% Source: Department of Housing and Urban Development, U.S. Census Bureau
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 - $24,600 16.3% 33.6% 15.7% 32.3% $24,601 - $31,050 $31,051 - $49,700 $49,701 - $75,720 4.9% 9.0% 4.7% 8.9% 13.7% 22.3% 13.4% 21.7% 19.1% 17.3% 19.4% 18.6% Market-rate $75,721+ 46.1% 17.8% 46.8% 18.4% Source: Department of Housing and Urban Development, U.S. Census Bureau
Median Family Income in Nueces County by Census Tract (2016) Source: U.S. Census Bureau
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.
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)
II. Owner-Occupied Housing Affordability
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 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 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
Housing Affordability Index Owner-Occupied Housing Affordability in the Corpus-Christi MSA However, the MSA remains relatively affordable with an HAI above 1.00. 2.50 2.00 1.50 1.45 Housing Affordability Index: Corpus-Christi MSA 1.33 1.42 1.73 1.84 1.94 2.14 1.86 1.63 1.79 1.74 Increasing Affordability 1.80 1.00 Median Income > Qualifying Income Median Income < Qualifying Income 0.50 0.00 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Federal Financial Institutions Examination Council and Real Estate Center at Texas A&M University
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 2011 2.04 1.94 2.40 1.68 1.58 1.98 2.12 2017 1.54 1.80 2.01 1.54 1.54 1.59 2.06 Source: Real Estate Center at Texas A&M University
1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 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, 1981-2017 Historical average: 2.7% Seven-year average (2011-2017): 3.5% 5% 0% -5% -10% Source: Federal Reserve Economic Data
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 (2010-2017) 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% 2010 2011 2012 2013 2014 2015 2016 2017 Source: Real Estate Center at Texas A&M University
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 (2010-2017) 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% 2010 2011 2012 2013 2014 2015 2016 2017 Source: Real Estate Center at Texas A&M University
Source: Real Estate Center at Texas A&M University Spatial Distribution of All Residential Sales
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 $100,000-199,999 Tremendous growth in new construction of homes priced $200,000-299,999 60% New Residential Sales Activity in Nueces County (2010-2017) 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 $400,000+ 10% 0% 2010 2011 2012 2013 2014 2015 2016 2017 Source: Real Estate Center at Texas A&M University
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 $100,000-199,999 Tremendous growth in new construction of homes priced $200,000-299,999 70% New Residential Sales Activity in the City of Corpus Christi (2010-2017) 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 $400,000+ 10% 0% 2010 2011 2012 2013 2014 2015 2016 2017 Source: Real Estate Center at Texas A&M University
Spatial Distribution of New Residential Sales (MLS) Activity Source: Real Estate Center at Texas A&M University
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.
What Is Affordable?
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
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
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
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 - $86,539 16.3% 22.9% 6,892 Very Low Income $24,601 - $31,050 $86,540 - $109,229 4.9% 9.7% 5,046 Low Income $31,051 - $49,700 $109,230 - $174,837 13.7% 30.5% 17,515 Workforce $49,701 - $75,720 $174,838 - $266,372 19.1% 22.8% 3,855 Market-rate $75,721+ $266,373+ 46.1% 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
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 - $86,539 15.7% 21.6% 5,251 Very Low Income $24,601 - $31,050 $86,540 - $109,229 4.7% 10.1% 4,804 Low Income $31,051 - $49,700 $109,230 - $174,837 13.4% 32.8% 17,356 Workforce $49,701 - $75,720 $174,838 - $266,372 19.4% 23.7% 3,915 Market-rate $75,721+ $266,373+ 46.8% 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
But wait!
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 - $86,539 16.3% 9.6% (6,951) Very Low Income $24,601 - $31,050 $86,540 - $109,229 4.9% 6.4% 1,648 Low Income $31,051 - $49,700 $109,230 - $174,837 13.7% 27.0% 13,836 Workforce $49,701 - $75,720 $174,838 - $266,372 19.1% 32.6% 14,076 Market-rate $75,721+ $266,373+ 46.1% 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
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 - $86,539 15.7% 9.8% (5,335) Very Low Income $24,601 - $31,050 $86,540 - $109,229 4.7% 6.7% 1,782 Low Income $31,051 - $49,700 $109,230 - $174,837 13.4% 28.6% 13,624 Workforce $49,701 - $75,720 $174,838 - $266,372 19.4% 34.7% 13,744 Market-rate $75,721+ $266,373+ 46.8% 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
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.
Where Is the Supply of Housing by Income Cohort?
Spatial Distribution of Homes Affordable to Each Income Cohort (2017) Source: Nueces County Appraisal District
Spatial Distribution of Homes Affordable to Each Income Cohort (2017) Source: Nueces County Appraisal District
Where Do Homebuyers Purchase Homes?
Type of Loan Home Purchase Originations in Nueces County (2011-2017) Number of Loans Percent of Loans Median Loan Amount Median Applicant Income Estimated Median Priceto-Income Multiplier Conventional 10,752 52% $161,000 $90,000 2.52 FHA-insured 6,294 30% $151,000 $63,000 2.60 FSA/RHSguaranteed VAguaranteed 10 0.05% $86,000 $52,000 1.79 3,671 18% $198,000 $78,000 2.76 Total 20,727 $164,480 $79,657 2.59 Source: Consumer Financial Protection Bureau Average loan-to-value ratio: 89%
Home Purchase Originations in Nueces County by Income Category (2011-2017) Majority of home purchase originations are for market rate housing (households earning greater than 120% of the median family income) In essence, homeownership is not an option for extremely low or very low income households (households earning less than 50% of the MFI) Income Cohort Number of Home Purchase Originations Percent of Home Purchase Originations Extremely Low Income 24 0.1% Very Low Income 375 1.8% Low Income 2,308 11.2% Workforce 5,447 26.4% Market-rate 12,472 60.5% Source: Consumer Financial Protection Bureau
Source: Consumer Financial Protection Bureau Home Purchase Originations by Census Tract (2017)
III. Renter-Occupied Housing Affordability
An Overview of Renter-Occupied Housing Affordability The Department of Housing and Urban Development (HUD) defines cost-burdened households as those who spend more than 30% of their income on rent. We have adopted this methodology into our calculations of renter-occupied housing affordability.
How Much Rent Can A Family Afford? (2017) Income Cohort Family Income ($) 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
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-$615 33.6% 20.5% (6,892) $24,601 - $31,050 $31,051 - $49,700 $49,701 - $75,720 $616-$776 9.0% 14.1% 2,692 $777-$1,243 22.3% 34.4% 6,359 $1,244-$1,893 17.3% 23.2% 3,112 Market-rate $75,721+ $1,894+ 17.8% 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
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-$615 32.3% 19.8% (6,148) $24,601 - $31,050 $31,051 - $49,700 $49,701 - $75,720 $616-$776 8.9% 14.2% 2,619 $777-$1,243 21.7% 34.4% 6,216 $1,244-$1,893 18.6% 23.7% 2,469 Market-rate $75,721+ $1,894+ 18.4% 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
IV. Future Housing Needs
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 2.78. 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
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Number of Permits Building Permits in Nueces County 4000 3500 3000 2500 2000 1500 Single family units Multifamily units 1000 500 0 Source: U.S. Census Bureau
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
Increase in Single-Family Median Living Area 2,500 Median Living Area (SF) by Year Built 2,000 1,500 1,000 500 - YEAR BUILT Source: Nueces County Appraisal District
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.
V. Housing & Neighborhood Quality
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.
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.
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
Age of Owner-Occupied Housing Source: Nueces County Appraisal District
Age of Owner-Occupied Housing Source: Nueces County Appraisal District
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
Travis County - Land Value & Location Single Family Land >= $25 PSF Single Family Land < $7 PSF
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
Nueces County - Land Value & Location Single Family Land >= $4 PSF Single Family Land < $3 PSF
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.
VI. Conclusion
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?
Thank you!