What's the deal with the Texas housing market? Why so cheap in nice areas? (Houston: real estate, affordable house)

[texasdiver]

With the exception of Austin's west hills, Texas cities have no real geographic boundaries to define exclusivity. Visit other cities on the coasts and you have built-in exclusivity due to geography. Take Seattle or San Francisco. Both cities occupy a limited geographic footprint surrounded by water. And they are also hilly. Which means that shoreline properties and view properties from the hilltops command huge premiums. They aren't making any more shoreline or hills in those cities. If you want a view house or shoreline house in Seattle or San Francisco you are going to have to pay through the nose because they haven't built any new ones since about WW-II.

By contrast, most Texas cities are just sitting in the middle of endless prairie. There's very little geographic difference between the high-end neighborhoods and poor neighborhoods. In fact, in many cities the poorer neighborhoods actually have nicer geographic features because they are older and were sited first. since you don't have shoreline or hills in most of Texas the only way to create an exclusive neighborhood is to take a big tract of empty land, put a wall around it, and call it an exclusive neighborhood. That's what all the big master-planned communities in Texas basically do. But there's just an endless amount of land around all the big cities in Texas so nothing is really exclusive or unique. Next year some developer is always going to build some fancier development next door or further out. So in all the big cities there's almost a limitless supply of upscale housing compared to the cities on the coasts where it is very much a limited quantity and you get the bidding wars and big run-up in prices.

Construction costs are also lower in Texas than most other northern states. Labor is cheap. The ground is mostly level and stable. So they do little more than push the soil around a bit with a bobcat then start pouring the slab foundation. I'm always amazed at how fast houses go up around here compared to where I used to live in Washington.

And as other comments have noted. Taxes probably also serve to depress housing prices relative to other states. Someone who might be able to afford the mortgage on a $500,000 house might not be able to afford the taxes on top of it which are going to run $12,000 - $15,000 yr depending on the jurisdiction. That's over $1000/mo. And we haven't even gotten into utility bills, insurance, and HOA fees on that sort of mansion. Those are going to run at least another $1,000 mo minimum so you're looking at a $2,000 to $2,500 monthly bill on a $500,000 house before you even get to the mortgage. That certainly limits the market for those sorts of houses and explains why so many are in the $200,000 range.

[Bo]

Local government in Texas is friendly to developers, thanks to state laws that strictly limit local control over development. The developers take full advantage of that and make sure that there is plenty of new housing stock in the growth areas of Texas. If you try to resell a house in these areas during a down market, you're competing with builders who can afford to price homes close to their cost and below market value, just to keep their sales numbers up. That oversupply keeps housing cheaper than in other states with tighter controls on development. It also makes it tougher to resell a home once you buy it, as your resale home will be competing in the market with so much new housing stock.

[EasilyAmused]

Originally Posted by FLA17

From the numbers I see on city-data and elsewhere, Texas has a great economic field. Residents of the woodlands make $110k a year but only pay an average of 200k for housing. In Spring they make 70k but only pay 160k for housing. In Plano, a city of 270k people, they make 85k a year and only pay 217k for homes. Is there something I'm missing here? Because the homes I've seen in these areas are amazing. Why are they so cheap in nice safe areas with a good economic climate?

They are also "cheap" because these are commuter areas, an hour's drive from the core of the cities. They are also cheap because they are mass produced on land that isn't worth that much, due to distance from cultural centers.

[hsw]

Can be deceptive...differences are smaller when do proper apples to apples cost comparo...and really varies by one's income level...and one's industry, as those in tech industry have career incentives to stay in SiliconValley, whereas for those in energy industry Houston is the global epicenter like SV is for tech

Need to look at prices of land of comparable suburbs close to high-income jobs and within top public school districts or nr top private schools....Houston's RiverOaks and Dallas' PrestonHollow or HighlandPark have more costly land than SiliconValley's most elite suburb, Woodside, or NYC's most elite suburb, Greenwich

Construction costs per sf (for similar quality) are nearly 50% cheaper in Dallas or Houston vs SV or LA

But biggest advantages for those with high incomes (>$200K/yr or whatever the community organizer-in-chief calls "evil rich folks" these days) is TX's lack of state income tax....and a pro-business, pro-small government ethos (and civilized stuff like competent suburban public/private schools and competent local physicians) which probably mean more major companies will move HQs and high-income jobs to Dallas or Houston than to other places w/allegedly "cheap" taxes or costs...like FL or NV or Atlanta or Phoenix or Austin or SA...

[latetotheparty]

Originally Posted by getmeoutofhere

It's rarely as high as 3%. Usually between 2% and 2.6%.

It balances out with no state income tax, though.

not always ...... in missouri, we pay a 6% state income tax, but my property taxes are relatively low...... when i finally make the move back to texas, depending on exactly where i land, i will be paying more in property taxes than i do at present with property taxes and income taxes combined.......

[tstone]

Originally Posted by getmeoutofhere

It's rarely as high as 3%. Usually between 2% and 2.6%.

It balances out with no state income tax, though.

3% is reality in Houston area suburbs, not sure about Plano but I'd venture to guess it is similar.

For example: unincorporated areas of Harris County, somewhere around 2.5% Houston in HISD you're looking at about 2.6%. Houston in a good school district is closer to 2.8-2.9%. Suburb town with a good school district, 2.9-3.5%.

That percentage is of the value minus homestead exemption, which is roughly 20%. So a 200k home would be taxed on 160k, by 3% is about 4800/yr.

As far as homeowner insurance, on said home would be around 2200/yr near the coast in Harris County. In a true coastal county, probably more... inland probably half. Flood insurance would run around 350/yr unless you're in the 100 yr flood plain. For that one, good luck.

HOA fees would be around 500/yr for such a house.

Electric+gas bills would run around 200-250/mo for about 4 months for a reasonably efficient home. Otherwise, 100-200 combined.

Homes need maintenance; roofs take beatings and air conditioners are run hard. Unless you get a new home you might want to keep some cash on hand for both.

Things aren't all that cheap if you look at the details. You're putting your money into taxes, insurance and utilities instead of equity here. At least you can write off the property taxes as well as the general sales tax.

[getmeoutofhere]

I guess Houston is a little higher than Dallas. Never knew that.

[Steel Man]

Originally Posted by getmeoutofhere

It's rarely as high as 3%. Usually between 2% and 2.6%.

It balances out with no state income tax, though.

Originally Posted by latetotheparty

not always ...... in missouri, we pay a 6% state income tax, but my property taxes are relatively low...... when i finally make the move back to texas, depending on exactly where i land, i will be paying more in property taxes than i do at present with property taxes and income taxes combined.......

Yeah, but it costs a little more to live in Heaven!

[tstone]

Originally Posted by getmeoutofhere

I guess Houston is a little higher than Dallas. Never knew that.

On the flip side I understand Dallas has higher home prices. So if the appraisals follow suit that would balance out w/ the slightly lower tax rate.

[Squirl]

I like living in Texas b/c it allowed my adult children to live in lovely homes and my grandkids actually had stay at home moms b/c the families could live in decent housing/neighborhoods on a single income. I hate the heat in the 3rd quarter of the year and you really have to look hard to find natural beauty here. I wonder about getting around w/o decent public transportation as I age and just would love to live where I could catch a bus or train and walk to interesting destinations. Sometimes when I visit my family in the SF bay area I wonder what I am doing living here......