January 9, 2015 | by Katie Claflin
Categories: Affordable Housing, Construction, First Time Buyer, Homeownership
Last year was a frustrating year for many entry-level home buyers hoping to purchase a home in Texas. Why was the Texas housing market unkind to entry-level buyers in 2014?
A recent study released by the Federal Reserve Bank of Dallas offers an explanation.
As housing demand increased over the past few years, the availability of moderately-priced homes began to dry up. For example, the number of existing homes priced under $200,000 has decreased dramatically in the past four years, from almost 70% of the market in 2010 to 56% of the market in 2014. Homes that were once priced under $200,000 are now priced much higher, squeezing many entry-level buyers out of the market. Citing data from the Texas A&M Real Estate Center, the Dallas Fed argues this phenomenon particularly affected buyers in the Austin, Dallas and Houston markets.
Additionally, developers have been slow to build entry-level housing, instead focusing on more expensive homes. This is for two reasons: 1) entry-level home buyers have had more difficulty qualifying for mortgages, and 2) it is easier to recoup building costs with a more expensive product.
Although 2014 was a tough market for entry-level buyers, there is hope on the horizon. Effective Dec. 1, 2014, new guidelines from Fannie Mae and Freddie Mac have eased lending standards to help more low and moderate-income buyers qualify for mortgages. As a result of the additional demand created by these entry-level buyers, the Dallas Fed predicts that overall housing demand will increase in 2015, which should motivate builders to resume building moderately-priced homes.
As housing options increase for first-time and other entry-level buyers, home buyer assistance programs like TSAHC’s become even more important to ensure these buyers can achieve their dreams of homeownership.
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