Texas has long had a reputation as an affordable place to live, in large part because homeownership stayed within reach for the middle class.
Now the state is being walloped by the same forces that have made homes a lot less affordable in many cities previously known for reasonable prices: pandemic-era migration from California and other more expensive areas.
California to Texas was the most popular interstate relocation route in the country in 2021, according to an analysis by storage-space search site StorageCafe using Census Bureau data. During that year, about 111,000 people—about 300 a day—moved from California to Texas.
Soaring prices have left many longtime residents grumbling about the Californization of Texas.
The Federal Reserve Bank of Dallas recently analyzed data on housing affordability in Texan cities, defined as the percentage of the housing stock affordable to families earning the median income in those places. At the beginning of 2014, nearly two-thirds of homes in San Antonio were affordable for a median-income family. By the end of 2022, fewer than one-third were. Affordability, defined as what a family spending 28% of its gross income on housing could buy, also declined in Dallas, Fort Worth and Austin, before ticking up slightly early this year.
Maintenance technician Randy Templeton moved from Illinois to San Antonio a decade ago because of Texas’ low cost of living. This year, however, when he started looking for an affordable home to buy and fix up for his growing family, he got an unpleasant surprise.
“The prices on those fixer-uppers shot up ridiculously,” he said. “And then even if you do find a home that’s for sale, you’re paying twice what you would have paid even just four years ago.”
Similar price spikes are hitting many other cities around the country where government workers, teachers, and other middle-class professionals have long found affordable housing. In this year’s second quarter, 40% of homes in Raleigh, N.C., were considered affordable, down from 73% in first-quarter 2014, according to data from the NAHB/Wells Fargo Housing Opportunity Index. In Sacramento, the share of affordable homes fell from 45% to 18% during that period. The Affordability in Colorado Springs dropped from 79% to 25%, and in the Fort Myers, Fla., metro area, from 69% to 26%.
“Austin became extremely expensive during the pandemic, and San Antonio has experienced spillover migration as a result,” said Daryl Fairweather, chief economist for residential real-estate brokerage Redfin. “Sacramento is the top migration destination for home buyers leaving San Francisco, and Raleigh has been popular among home buyers leaving Washington, D.C.”
Texas gained 9,085,073 residents between 2000 and 2022, more than any other state, making it the fourth fastest-growing state in the U.S. Even before the pandemic hit, people were moving to San Antonio from other Texas cities and other states, according to tax data analyzed by the AEI Housing Center. The latest data, for 2019 and 2020, shows the largest source of net migration to Bexar County, where San Antonio is located, was Southern California, followed by other Texas counties primarily along the border, and Hawaii, Illinois and Washington.
San Antonio’s affordability started to drop in the first half of 2021, according to the Dallas Fed report, which attributed the price spike to rising demand, increased labor costs and higher building-supplies prices related to the pandemic.
Texas home values rose sharply postpandemic. The price appreciation peaked in early 2022 at a 20% year-over-year increase, according to data from the Federal Housing Finance Agency. That spike was comparable to California’s in 2004 and 2005, following the dot-com boom, although Texas homes are still much less expensive than those in California.
Luis Torres, senior business economist at the Dallas Fed’s San Antonio branch, said that while Texas is still affordable compared with many other states, the drop in affordable housing was significant because the state was always less expensive than other parts of the U.S., and the region had never seen such sharp price increases.
Home prices in Texas were largely flat from 2000 to 2005 when prices were rising nationally, which allowed Texas to largely escape the housing boom and subsequent bust that led to the 2007-09 recession.
Similar forces are driving up prices in Sacramento and Raleigh, both state capitals and traditionally affordable for the government workers who make up big chunks of their workforces.
Heidii Smith, a Sacramento real-estate agent since 1985, said the city has always been desirable because of its proximity to Tahoe and the Bay Area, but previous demand was nothing compared with the slew of people who started buying homes in cash at the start of the pandemic.
“They could pay cash, and that was maybe a quarter or third of what they sold their homes for in Silicon Valley,” Smith said. “It’s been a very hard market for first-time buyers.”
Some first-time buyers are just watching the market and hoping to find a deal that fits their budget, she said, but it’s a challenge with historically low inventory and people making offers substantially over asking prices.
Top employers in Wake County, N.C., where Raleigh is the county seat, include the public-school system and Duke University. Employees of those places now have to compete for housing against an influx of young professionals priced out of coastal cities or taking jobs in the growing local tech sector.
Carmen Cauthen, author of “Historic Black Neighborhoods of Raleigh,” has lived in the area for more than six decades. In 2020, she and her then-husband purchased a home for $65,000 in the Oberlin neighborhood, one of the historically Black ones. They are now in the process of selling the house, which she said is now worth $319,000.
But even with her half, she said, she can’t afford to buy in the city. “Here I am at 64, trying to figure out what to do next,” she said.
Cauthen said she may do what other locals have done: move out of the city. She and her brother are considering building homes on land her family owns outside Raleigh.
In Texas, the low cost of living has long attracted out-of-staters. The pandemic accelerated that process. Net migration increased nearly 60% in the five quarters following the beginning of the pandemic, compared with the five quarters preceding it, the Dallas Fed report said.
Texas is still affordable compared with other places. The median listing price in Texas was $379,900 in September, compared with $760,000 in California, according to the Federal Reserve Bank of St. Louis.
“A lot of people were getting priced out of Austin and started moving into San Antonio,” said San Antonio real-estate agent Marie Crabb. “They were getting priced out, according to them, by people from California. It was an interesting trickle-down effect.”
Among the new buyers in San Antonio were 34-year-old Kathleen Rubin and her husband, Justin Davidson, who had been living in Austin for years. In 2021, when the home they had been renting in the state capital went on the market, they decided their money would go much further in San Antonio, their hometown.
Last year, they bought a 2,500-square-foot home with three bedrooms and an office for about $400,000. The mortgage payment is roughly what they were paying the rent in Austin, she said.
“We just felt like we could get a lot more bang for our buck” by leaving Austin, Rubin said. “We also really upgraded our lifestyle.”
The influx of newcomers to San Antonio, coupled with a limited supply of homes, has driven up prices. The city’s top employers, predominantly in the military, education and healthcare sectors, provide stable but not high-paying jobs, contributing to the affordability challenge, said Ali Wolf, chief economist at housing-market research firm Zonda based in Newport Beach, Calif.
“This is when San Antonio started to face some of the issues of the other markets,” Wolf said. “Now home prices were aligned with some of the newcomers.”
Lesley Hernandez, who has lived in San Antonio since 1990, started looking for her first home in 2021. She qualified for a $300,000 loan but was disappointed by the homes she could afford in central San Antonio.
Hernandez ended up buying a $270,000 home on the southwest side of San Antonio, farther from her family than she wanted. A similar home closer to the city center would have cost $350,000 or more, she said.
Lorraine Warhurst, a San Antonio real-estate agent, said competition is high for available homes partly because would-be buyers from states like California, Oregon, Washington, New York and Florida want to capitalize on the equity from their homes there.
She cites higher interest rates as another factor making homes unaffordable for some first-time buyers.
Existing homeowners with low-rate mortgages, in many cases around 3%, are less likely to trade up to a more expensive one now that interest rates are much higher, said Buzz Roberts, president and CEO at the National Association of Affordable Housing Lenders.
Another constraint on supply in San Antonio and other Texas cities was that construction of single-family and multifamily residences had lagged behind demand. That also pushed prices higher.
Although pandemic-related supply chain problems have improved, said Roberts, construction costs remain high due to the increased cost of materials, interest rates and labor, said Roberts. And fewer starter homes are being built, he said, because builders are finding it more profitable to build larger, more expensive ones.
Two bills aimed at increasing housing availability and supported by the Texas Association of Builders died during the last state legislative session. One would have reduced requirements in Texas cities for how much land was needed to build a new home, and another would have made those cities loosen their rules on adding smaller dwellings on the same lots as larger homes.
The Dallas Fed report cited some evidence that the affordability situation is improving. “Recent moderating demand—a consequence of escalating costs—and rising housing inventory may curb further erosion of affordability” the report said. In the second quarter of 2023, 40% of San Antonio homes were deemed affordable, up from 29% at the end of 2022.