Lease prices jumped 16% year-over-year in June due to a steady stream of people moving to Texas and more people sitting out the housing market. Higher rents since the end of the pandemic have been a significant driver of inflation.
A resident walks outside the newly-opened Tunnel to Towers Veterans Village in November 2023 in Tomball. Tunnels of Towers opens phase 1 of the $10 million housing project that will place approximately 130 homeless veterans in rooms and provide services to help with PTSD, substance abuse, financial struggles and other challenges.
Tamarron, a community planned for more than 8,000 homes in the Katy area. The community is a development of D.R. Horton.
A home under construction in Colony Ridge, a community of 40,000 residents in Cleveland, northeast of Houston, in October 2023.
A house is shown under construction in the Jordan Ranch area in April 2023, in Fulshear.
One of the most critical things for human survival is the likely culprit for the average American’s sour view of the economy: shelter.
Rent increases, mortgage rates and home values decide how much money most Americans have left to spend on food, family and fun. The nation’s housing crisis has raised costs so high that too many people struggle to keep up.
Like most city dwellers in recent years, I feel like I’ve seen more tents and shelters in public parks or under highway overpasses than I can remember. In rural areas of the state, I see people living in homes so dilapidated that a strong wind might blow the already-tilting walls down.
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While debate rages over whether the proportion of unsheltered people has increased or is only more visible, people living on the street rebut reports of a healthy economy.
The causes of homelessness are as diverse as the unhoused themselves, and there are no easy answers. Despite a strong economy, Department of Housing and Urban Development data shows Texas has the fifth highest homelessness rate in the nation, even after urban leaders have made some progress finding people homes.
Permitting new construction in Texas is relatively easy, lot prices are low and building costs are reasonable. Nevertheless, builders are not moving fast enough, especially in adding affordable, entry-level housing.
Supply chains broke down during the pandemic, and prices for essential commodities such as lumber and plumbing supplies skyrocketed, making new homes more expensive. In recent years, inflation and high interest rates have been the most significant barriers to new construction.
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The Federal Reserve Bank, charged with controlling inflation while maintaining maximum employment, raised the interest rate it charges banks for short-term loans. More expensive loans slow business borrowing and inflation.
Banks pass those higher rates on to homebuyers through higher mortgage rates, which drive up monthly payments. For example, a $2,000 monthly payment could buy a $475,000 home with a 3% mortgage but only a $300,000 home with a current 7.5% mortgage.
Higher interest rates also encourage people to remain in their homes if they have a low mortgage rate. If they must sell, they will likely get lower bids from buyers with less to spend. In Houston, November home sales volume was down 23% from the peak in March 2022.
Fed Chair Jerome Powell has promised to lower rates once inflation is back down to 2%, which could happen next year, according to the latest Fed meeting minutes. Many savvy prospective homebuyers have chosen to remain in rental units until mortgage rates drop.
Lease prices jumped 16% year-over-year in June due to a steady stream of people moving to Texas and more people sitting out the housing market. Higher rents since the end of the pandemic have been a significant driver of inflation.
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Developers also have mortgages, so higher interest rates make it more expensive for landlords to add more units.
In searching for higher profits, landlords have also torn down or rebuilt half of Texas’ low-rent units in the past decade, according to Harvard researchers. The result is higher rents for everyone and more families unable to find affordable housing.
If you cannot afford a home, cannot afford to sell your home or your rent has risen faster than your paycheck, you have good reason to hate this economy.
For too long, Democratic and Republican leaders have failed to implement policies to encourage more housing, affordable or otherwise. Builders complain of strict regulations in Democratic-controlled cities and counties, while they say Republican areas discourage affordable units with zoning.
Long-term solutions will require compromises on both sides of the aisle. Democrats must speed up permitting processes that slow new construction and limit costly regulations. Republicans must make it easier to build affordable housing in affluent areas.
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In the short term, economic indicators are encouraging. Inflation is coming down far faster than anyone anticipated, and mortgage rates are dropping, too. Wages and salaries are also rising faster than inflation.
Notes from the last Federal Reserve meeting suggest lower interest rates are coming, likely in mid-2024.
“In their submitted projections, almost all participants indicated that reflecting the improvements in their inflation outlooks, their baseline projections implied that a lower target range for the federal funds rate would be appropriate by the end of 2024,” the document said.
The financial side of the housing crisis is working itself out; now, we need politicians ready to tackle the policy side, something all sides have neglected for too long.
Award-winning opinion writer Chris Tomlinson writes commentary about money, politics and life in Texas. Sign up for his “Tomlinson’s Take” newsletter at HoustonChronicle.com/TomlinsonNewsletter or Expressnews.com/TomlinsonNewsletter.
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