What is home affordability
What is home affordability and because everyone’s talking about this right now, right, like what’s affordable housing? What’s the number? What’s going on? Is there a certain threshold?
Well, they’re saying it’s not affordable, right?
So the answer that we have to kind of discuss here because you hear this all the time from your clients, but people are still moving, so it’s affordable.
They are. So that’s what we have to talk about, right? With this, the agents, you know, you’re you’re consistently talk with your buyers or your sellers, and they have questions about a lot of different things like can we do this and what’s going on?
So that’s what we’re going to kind of break down now for us. Break it down. So is it affordable? I have a graph that’s going to show us right now so you can take a look. And the big thing is it is the state of Texas. So where we’re going to look is the difference between the home prices, right?
And we’re going to look at the two lines, the red line and the blue line. Ok. Texas is the red line in the whole U.S. as a whole is the blue line. And this is how home prices have went up. And what you’re going to see is that if you look at when the recession, when the when the issue happened, right, like right, where that line is, what is the difference between the space between the average home and the U.S. home in Texas?
Then you’re going to look at that same line, those same two lines right now. What you’re going to see is there’s the same gap between them. So it means that Texas is still more affordable, yes, than the rest of the country, so it’s all relative. Mm hmm. Right? Yeah. If you if like the whole world is this way and you are this way, right? It’s like there’s so many different examples, but it’s it is what it is.
It’s very affordable here, right? It’s just how things progress. It’s extremely where we live and you can look back from. I mean, we’re to start a one. I mean, there was that huge jump and we stayed very steady, but that was a different weird. That was a more of a banking caused. Issue, I would say, and everything else is been supply and demand.
The only thing you’re seeing the difference between, even if you go back to oh one, there’s still a gap between the two numbers, right? And that the gap between it is pretty much the exact same as it is now. Just a little bit smaller, possibly, right? Just a little bit smaller.
The only thing that diverged is and where we were spared is if you look what happened in all the way through two three four five six seven those years, the rest of the country got way out of whack and had a huge crash and then had a huge crash all the way back in Texas just continued to move ahead at kind of this consistent level.
A lot of the reason is because we didn’t have cash outs, our home equity loans here, and we didn’t follow that national trend as closely. And we also have a low cost building base that, you know, comes from south of the border. And because of that, it stayed consistent.
And those don’t those factors don’t change, they have not changed. But so Texas is still extremely affordable compared to other places. Yeah, I we can’t we can’t like figure out what’s going on across the whole world and we can’t control that.
You can just look locally to see what’s going on. And homes are still really good prices here compared to anywhere else. If you look at where people would seek to move,
So that means no, they’re going to go. Other places are also increasing.
Other places are going up more. So that’s the issue is as you look going forward, where is it going to be cheaper to build a home? Mm hmm. Ok, so if there’s demand and people want more of them, where’s where’s it going to be cheaper to build? Is it going to be cheaper to build in Texas or is it going to be cheaper to build somewhere else?
And as you start looking at the best places to live and all those things, you have to also consider how much it costs to live there, right? And we’re consistently on one of those lists for the top places to live. And we have affordable ways to build homes. Mm. Yes. And it’s not always the case everywhere else.
And they’re still outskirts of land that are being developed that are relatively close to all the amenities of a bigger city. Right?
So, so then the second question that people are asking with affordability is, is it relevant? So what we just covered, is it relatively affordable in proportion to where it is other places? And the answer is yes, yes. So we’re still relatively affordable when you compare other items.
Why people are leaving certain areas and coming here. That’s why we have such a supply issue, right? Yeah. There’s a demand for everything that we offer here in Texas.
And then the second question is how much are people making and can they afford? To live in the house that is available for sale right here, right, so the fundamental question is like should everybody be able to live in San Francisco like they have really nice weather there, right?
California is beautiful weather. Does everybody get to live on the beach in the United States? The answer is no. Ok, so some people live on the beach. Some people, like I have a two minute walk to the beach. Some people like I have a two minute car ride to the beach. Some people have a two hour plane ride. Some people, it’s you’re not going to the beach. Ok.
What is a beach?
Yeah. So at the end of the day, right? It’s. What you’re probably going to have to do is get comfortable driving. Right. And the same reason, if you look back, historically, nothing has changed. No, all the fundamentals are the same. And if Dallas is the epicenter of our local market, then Highland Park is expensive because it’s close to Dallas.
Yeah, and there’s things you can do there, right? And then there’s a loop and I want to go outside the loop. It’s like, Oh, I don’t want to go outside that loop. And then all of a sudden it’s like, I don’t want to go outside that loop because there’s. Is it too late?
What’s the the inner loop? Is it two, 88 or? Close to Dallas. Like, six, thirty five now, even closer loop. I don’t know. No. Ok. There’s a couple of loops around Dallas that, yeah, people don’t want to go around. Outside the loop,
Just somebody else knows.
So anyways, you’re going to have to just get comfortable driving Sherman Denison, Oklahoma. Those are places that you’re going to.
Everybody wants to live in the most popular place, right? But we just. I think it boils down to personally that I think people have kind of grown into this. Keeping up with the Joneses and wanting to live where the most popular place is and they’re going outside of their means, but.
You know, my parents lived within their means. Your parents lived within their means, and there was also a place that you would dream about living in, right? But you can only live where you can afford. So affordability is where can you afford to live, right? I don’t know, it’s kind of simple. It’s how it’s always been.
Yep, same thing. Plano was one of those places before, and then Frisco became one and then prosper became another. And now Salina, for instance, hasn’t always been.
Keep driving, but it’s grown and there are schools in different factors. But you know, if it’s not within your means, then you either have to find another job, do something different or, you know, live somewhere else.
Kind of simple, is it affordable, yes.
But relative to the whole country, yes, we are still very affordable, you can talk to anybody who has, you know, migrated to Texas and they’ll tell you, yeah, it’s it’s very affordable gas right now. Prices are pushing $4 a gallon here, which is outrageous. There are six or seven dollars elsewhere. I saw that on the news this morning. I mean, that’s nuts.
All right, and then one other item is how our wages increasing and how our home prices is increasing. Ok, so if your wages wages are currently going up by nine percent a year? Home prices typically go up with inflation or inflation, plus a little bit, and so now they’re currently going up by a little bit more than inflation.
And so what we have is real wages going up approximately nine percent for the year as the estimate. So wages up nine percent and housing also up nine percent. So if that’s the case, you now have more money proportionately to pay for other things because your debt to income ratio for your housing is supposed to be within the front end ratio in the back end ratio.
So the front is supposed to be up to like thirty nine and then forty eight for the back end. So you’re you have more money. And actually the house is taking up a smaller percentage of your total income if they both go up at the same rate, right?
If housing prices go up more than real income, then you have to watch it only if they go up by more than twice the amount, twice the appreciation rate for the one so that it comes to, like, have the other numbers. Mm hmm. So housing is. Proportionately, for your income, even more affordable now, which is a crazy statement,
It’s all how you look at it. It is, but yes, in real dollars, it’s more expensive.
But we’ve seen it go so fast. We’re in Texas. We haven’t seen such a huge increase. It’s pretty. It’s been pretty steady. You know, historically and now we’ve seen a crazy thing that hasn’t happened here before. So I do think there’s a little bit of a panic that is involved like, Oh my gosh, what is happening? Are we in a bubble?
You hear that a lot, too, but. No, I don’t think so. And I also kind of think we’re a little more safe here because of our ethnic diversity in certain areas and what we have, there is a lot of cautious people who are reserved. And who don’t overextend.
And what that does is allows you to not have a great reset and have a crisis if people have good equity positions. They’re not going to sell for like rock bottom prices or they’re not going to be foreclosed upon, right, because they have good equity positions.
And it’s we can weather the storm better because of the equity here and specifically different ethnic makeups often save more. Yeah. And so I think we’re going to be I don’t know. I just don’t see problems at all. I really don’t. Ok, well, we’ll see.