Texas’ Housing Shortage Makes Down Payment Programs More Important than Ever

June 24, 2016 | by Katie Claflin

Categories: First Time Buyer, Homeownership

There’s a housing shortage in Texas, and it’s affecting younger, first-time and lower-income buyers the most. That’s because, although there are fewer homes available to buyers at all income levels, it's starter homes that are in the shortest supply.

A recent analysis conducted by the real estate listing company Trulia found that nationwide, the number of starter homes on the market (defined as homes in the bottom third of all home prices) has dropped by nearly 44% over the past four years. 

In Texas, the problem is even worse, with three Texas cities among the top 10 metro areas with the largest decrease of starter homes. These include San Antonio (with an 86% decrease in starter homes), Austin (82%) and Houston (74%).

Trulia attributes the national starter home shortage in part to investors, who purchased starter homes at low prices during the recession as rental properties. Additionally, many lower-priced homes are still underwater from the recession, making these homeowners unable to trade up to more expensive homes.

But according to Trulia, the most important factor contributing to the decreased supply of starter homes is the rising price of trade-up homes (homes in the middle third of home prices) and premium homes (homes in the upper third of home prices). Why? It’s because, as premium home prices rise, it is more difficult for trade-up homeowners to find premium homes in their price range. And with fewer trade-up homes on the market, those living in starter homes but looking to move up have no choice but to stay put. This “gridlock” further reduces the number of starter homes available for younger, first-time and lower-income home buyers.

How Down Payment Assistance Can Help

TSAHC’s down payment assistance programs offer home buyers a grant of up to 5% of their mortgage amount. This grant can help boost home buyers’ purchasing power when searching for a home, making homes that were previously out of reach more affordable. Our down payment grants can cover most, if not all, of a home buyer’s down payment requirement, which also allows the home buyer to save some of their own hard-earned funds for home repairs or other unanticipated expenses. And because the grant never has to be repaid, all of the home equity belongs to the homeowner when the home is sold or refinanced.  

First-time home buyers can also qualify for TSAHC’s mortgage credit certificate (MCC) program, a tax credit that can save buyers up to $2,000 on their income taxes every year that they own their home. Lenders can count this tax savings as income when qualifying a home buyer for a mortgage, which means that the MCC program can further increase your purchasing power when buying a home.

To learn more about TSAHC’s down payment and MCC programs, visit www.readytobuyatexashome.com.  We also encourage you to sign up for a webinar on June 29th for more information about our programs and the home buying process.

On the House blog posts are meant to provide general information on various housing-related issues, research and programs. We are not liable for any errors or inaccuracies in the information provided by blog sources. Furthermore, this blog is not legal advice and should not be used as a substitute for legal advice from a licensed professional attorney.

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