bonham housing action plan€¦ · bonham housing action plan current conditions statistical...

1 Financial Analysis Does Not Constitute Investment Advice – For Municipal Planning Purposes Only

Bonham Housing Action Plan

Current Conditions Statistical Profile

Produced for the Bonham Economic Development Corporation

June 28, 2018

By

Daniel Oney, Ph.D. Principal, Axianomics, LLC

9506 Mill Hollow Dr. Dallas, TX 75243

214-280-7765 [email protected]


Contents

Preliminary Findings Page 3 Economic Data Page 5 Demographic Data Page 12 Housing Data 2


Preliminary Findings

This document is the first phase of the Bonham Housing Market Action Plan (BHAP). It includes a series of

charts covering economic, demographic and housing market conditions. In most cases, these charts include

data for the City of Bonham, Fannin County, Texas and the U.S. This comparison provides benchmarks that

put Bonham’s situation in broader context. This information is the latest available and was compiled from

many sources including local, state and federal agencies and North Texas realtors. This data is the

foundation for the next steps in the BHAP. The immediate next tasks are to complete the market analysis

which will add:

1. Profiles of the most promising housing market segments in terms of buyer and renter

characteristics and housing types,

2. Actual housing demand in terms of units by segment and price point over five and ten-year forecast

windows, and

3. A simple financial model to evaluate the prospects of various housing products in the Bonham

market.

Once the market analysis is completed, the housing implementation plan will create strategies and

recommend policies for the City of Bonham to consider.

The following analysis does not represent a housing market forecast or financial feasibility. That

information depends on digging deeper into these results and focusing on the most promising options. Still,

these results are already hinting at some opportunities and challenges the City and its stakeholders will face

as they promote more housing investment. The following are some very preliminary and only partially

verified conclusions:

1. In recent years, Bonham has experienced a historic level of underinvestment in new housing.

Permit activity and the total dollar investment is at the lowest level in decades.

2. Bonham’s overall economy is strong and has been growing faster than the Texas economy.

Unemployment is lower in Fannin County than in Texas or the U.S. Job growth is healthy.

3. Even with this economic growth, Bonham and Fannin County have income levels and an income

distribution that are typical of small cities and rural areas. Fannin County is a healthy rural area, but

still has lower income levels than Texas overall or the U.S.

4. Existing home market is showing signs of demand exceeding supply.

5. Bonham and Fannin County demographics and education levels, while reflecting typical rural

community patterns, are not an obvious barrier to new housing investment.

6. Recent housing market trends risk putting financial stress on existing lower and middle-income

households.


7. Even without the benefit of a detailed cost analysis, some preliminary strategies and market

segments are hinted at by this data. Determining final product potential and market segments will

require more research. The following housing niches, among others, should be considered in the

next phase of the research:

a. Existing home renovation programs for renters and middle income first-time buyers,

b. New home construction in conventional subdivisions targeting outbound commuters,

c. Duplex and townhouse construction in older neighborhoods tailored to inbound

commuters and existing middle-income households,

d. Second home / recreational rentals to support demand for access to the Bois d’Arc Creek

Reservoir.

e. Modestly priced multi-unit projects targeting the senior market.

f. Also, prospects for conventional multi-family developments should be evaluated.

The greatest challenge that the City and its stakeholders will face is creating a successful housing strategy

that does not increase the burden on existing lower and middle-income residents. It is possible that most of

the promising new housing products can only be delivered at prices beyond access for most existing

residents. These new products may be very attractive, and considered affordable, to households

accustomed to living in the DFW metro area or who will be visitors to the new reservoir.


I. Economic Data

Local Area Personal Income

Development potential depends on local conditions and national trends. The charts in this section give

macroeconomic context to an emerging Bonham housing strategy. The number one macroeconomic

predictor of real estate development is broadly-defined economic growth. This is often measured by gross

domestic product (GDP). Since the last recession in 2008, the Dallas-Fort Worth Metropolitan Statistical

Area has had a faster growing economy than Texas or the nation overall. Bonham’s proximity to the

$511.6B DFW economy is a strong motivator for housing investment in the city. Bonham also can benefit

from activity in the Sherman-Denison MSA, which is defined as Grayson County. The $4.3B Sherman-

Denison economy has been growing at a compound annual rate of 3.4 percent since 2011.

Gross domestic product is not available for non-metropolitan counties. Another statistic, Local Area

Personal Income (LAPI) is calculated by the U.S. Bureau of Economic Analysis for every county in the United

States. This personal income definition is more inclusive than more commonly used definitions. It includes

wage and salary income, income from business owners, dividends, interest and rental income and

government transfer programs (such as social security and “welfare” programs.) Over the last fifteen years

the correlation between GDP and LAPI is 99.7 percent. This gives us confidence in using LAPI as a broad

measure of economic activity at the county level.

Source: Axianomics, LLC analysis of Bureau of Labor Statistics LAPI data.

We see strong annual growth rates in total personal income at the national, state and county level. When

we look at per capita personal income growth, however we see that Fannin County has been out

performing the nation and Texas. This growth is a solid foundation for housing investment in Bonham.


Employment

Employment by place of residence counts people who have jobs no matter where those jobs are located.

This is the employment method used to calculate unemployment rates. It is commonly called household

employment. Total household employment in Fannin County has been growing steadily for the last seven

years after bottoming out in 2010 during the Great Recession.

Source: Bureau of Labor Statistics QCEW data.

Unemployment rates have fallen for several years and Fannin County has enjoyed lower unemployment

rates than the U.S. and Texas overall since 2015. A low unemployment rate of 3.3 percent in 2017 is a

strong incentive to workers and housing developers.

Source: Bureau of Labor Statistics QCEW data.


Employment by place of work counts jobs where the work takes place. This measure is often called payroll

employment. Fannin County added 648 private sector jobs between 2012 and 2017. These are local jobs. In

addition, several public-sector employers have maintained a strong presence in the county including the

Bonham city government and school district, Fannin County government, the Sam Rayburn Memorial

Veterans Center and two state prisons (C. Moore Transfer Facility and Cole State Jail.) The chart below

excludes self-employed persons and those in partnership-type businesses. It also excludes government

employment and thus under counts Fannin County total employment. Manufacturing has added the most

jobs in the last five years (231) followed by construction (182) and retail (165.)

Fannin County Employment Change by Industry (Jobs in Fannin County)

Employment by Place of work, private only QCEW

Industry 2017 5-Year Change 5-Year CAGR

Agriculture & Natural Resources 122 27 5.1%

Mining 62 22 9.2%

Construction 358 182 15.3%

Manufacturing 724 231 8.0%

Utilities 64 (6) -1.8%

Wholesale 230 29 2.7%

Retail 984 165 3.7%

Transportaion & Warehousing 75 (28) -6.1%

Information 27 (4) -2.7%

Finance & Insurance 241 (26) -2.0%

Real Estate, Rental & Leasing 74 31 11.5%

Professional & Technical Services 118 15 2.8%

Management of Companies - - NA

Admin & Waste Services 91 (32) -5.8%

Educational Services - - NA

Health & Social Services 864 (26) -0.6%

Arts, Entertainment & Rec 63 33 16.0%

Accommodation & Food Services 493 42 1.8%

Other Services 138 (12) -1.7%

Unclassified 5 5 5.0%

Total 4,733 648 3.0%


The following chart examines Fannin County industry employment grouped into the three traditional

categories of production, distribution and service industries. Production includes natural resource, mining,

construction and manufacturing jobs. Distribution includes utilities, wholesale and retail trade and

transportation and warehousing. Services includes all other private-sector industries. As is typical in healthy

rural areas, Fannin County has seen its strongest growth in production sectors, followed by distribution

industries. In recent years, however the county has also begun to add service jobs. The following chart

shows compound annual growth rates (CAGR) for these industry groupings.

Total employment up by 3% annually (5-Year CAGR)

Source: Axianomics, LLC analysis of Bureau of Labor Statistics QCEW data.


Earnings by Industry

The average earnings in Fannin County are almost $54,000 annually. Manufacturing jobs earn over $51,000

annually. The large federal workforce associated with Sam Rayburn Memorial Veterans Center earn on

average more than $93,000 annually. This and other core employment sectors represent a strong base for

housing upgrades or new home construction.

Fannin County Employment and Earnings (2016) Place of Work

Source: Axianomics, LLC analysis of U.S. Bureau of Economic Analysis, LAPI data.

Industry Jobs

Average

Earnings

Forestry, fishing, and related activities 154 20,884$

Mining, quarrying, and oil and gas extraction 201 54,130$

Utilities 85 87,714$

Construction 930 40,221$

Manufacturing 799 51,461$

Wholesale trade 340 57,705$

Retail trade 1,482 29,033$

Transportation and warehousing 261 35,898$

Information 69 32,942$

Finance and insurance 554 32,185$

Real estate and rental and leasing 414 20,633$

Professional, scientific, and technical services 456 22,563$

Management of companies and enterprises 46 2,419$

Administrative and support and waste management and remediation services 423 11,084$

Educational services 47 5,634$

Health care and social assistance 1,043 32,646$

Arts, entertainment, and recreation 188 7,151$

Accommodation and food services 644 15,619$

Other services (except government and government enterprises) 844 27,673$

Government and government enterprises 2,693 63,204$

Federal civilian 736 93,280$

Military 62 30,508$

State and local 1,895 52,823$

Total Jobs 11,672 53,607


Commuting Data

The following infographic summarizes the commuting pattern for Fannin County. The green circular arrow

represents 3,443 Fannin County residents who live and work in the county. The dark green arrow on the left

represents 2,756 people who live outside Fannin County but who commute into the county for work. The

remaining green arrow represents 8,906 workers who live in Fannin County but who work outside the

county.

Employment Inflow and Outflow (Jobs)

Source: LEHC Origin-Destination Employer Household Dynamics data (2015.)


The largest number of inbound commuters come from Grayson County (565), followed by Collin County

(441.) Interestingly, 878 inbound commuters represent small numbers of commuters from many counties.


The outbound commuters are focused on three counties: Dallas (1,992), Collin (1,620) and Grayson (1,595.)



II. Demographic Data

While employment data is the starting point of any housing investment strategy, demographic data

provides important information for segmenting the market into different buyers and product categories.

Household size, resident occupation and income influence homebuying decisions. This section summarizes

key demographic statistics for real estate developers and home builders. Local leaders in Bonham can use

this information to better understand what the best new mix of housing will be for Bonham.

Demographic Method Note Group Quarters in Bonham and Fannin County

Some demographic and socioeconomic statistics included in the following charts have been adjusted to remove the 1,991 inmates at the two state prisons in Bonham. The Census Bureau policy is to count individuals where they are at the time of the Census or the annual American Community Survey. This includes people living in group quarters. Group quarters includes residents in correctional facilities. This practice can distort important demographic and socioeconomic measures. Axianomics, LLC has obtained data from the Texas Department of Criminal Justice (TDCJ) that permits adjustments to some American Community Survey data used in this section of the report. The methods used will be included in a pending appendix. Charts that have been adjusted in this manner are noted in the chart source line with “Adjusted for group quarters.”

Fannin County and the City of Bonham have a typical split of male and female population. They are not

substantially different from the Texas and U.S. pattern.

Source: Axianomics, LLC analysis of Census Bureau American Community Survey (5-Year 2012-16.) Adjusted for group quarters.


The over 65 age group is a larger share of population in Fannin County and Bonham. The 20 to 34-year-old

age bracket is a smaller share than in the U.S. or Texas. This age distribution hints at two potential housing

segments. One focuses on seniors and includes a mix of small homes or multi-family properties for those

interested in downsizing. Another senior niche may be second homes on the Bois d’Arc Creek Reservoir.

The smaller 20 to 34-year-old segment is a demographic that is well represented in surrounding counties. A

strategy emphasizing small-city lifestyle may be effective at attracting more of this age group.


Median age in Bonham matches the U.S. and is higher than Texas overall. Fannin County has a higher

median age than the City of Bonham, Texas or the U.S.


Source: Axianomics, LLC analysis of Census Bureau American Community Survey (5-Year 2012-16.)

Race and ethnicity are separate demographic categories. Race includes white, black and several other

groups. The other group categories have been combined here because of the methods needed to remove

the group quarters population. Hispanic residents may be of any race. Fannin County and Bonham have a

higher share of white race residents than Texas or the U.S. Bonham’s black population is proportional to the

broader markets. Fannin County and Bonham Hispanic share is closer to the U.S. average than to Texas’s

much higher Hispanic share.



Households

Household type is one of the most important factors in housing choice. Married families are much more

likely to be home owners. Consistently, 80 percent of married households own their residence. Fifty

percent of non-married households own homes. Bonham has a smaller share of married households than

the larger geographies. This hints at the likely need to attract some investment in rental properties. This

investment can include a mix of renovated single-family homes and new construction of duplexes,

townhouses or traditional multi-family apartments.


Bonham and Fannin County household sizes are typical for the U.S. but a little smaller than for Texas. This

implies a standard mix of home sizes can meet the housing needs of existing residents. Housing investment

for new residents should be coordinated with recruitment strategies for specific segments.



Education

As in many rural counties, education levels in Fannin County and the City of Bonham reflect a smaller share

of college graduates. Local residents are more likely to have some college experience or an associate’s

degree than the U.S. or Texas population. Bonham also has a smaller share of residents that did not

complete high school than Texas or the U.S. overall.


Locally, residents with at least a high school diploma match or exceed the national rate. The share of

residents with at least a bachelor’s degree are smaller in Fannin County and Bonham than in Texas or the

U.S.



Household Occupation and Employment

The American Community Survey collects occupation and employment information. While this sample data

is not as current as the summary indicators reported above, they do provide some context when comparing

Bonham to other areas. Occupations are grouped into five major categories such as production and

transportation workers or managers. Most industries include a mix of occupations. Locally, residents are

more likely to hold production or transportation occupations. Most other occupational categories are

similar to national and state norms.



When comparing the industries in which residents work (regardless of occupation), they are more likely to

work in industries that produce goods than workers in Texas or the nation overall. There is also a smaller

share of workers who have jobs in service industries. Bonham’s higher government worker share is likely

due to the large institutions in the city.


The following charts give more detailed information on the industries in which residents work. Among

production industries, manufacturing plays a larger role locally than nationally or Texas.



Bonham residents are less likely to work in transportation, warehouse and retail jobs than residents of the

U.S., Texas or Fannin County overall.


Among the service industries, Bonham differs most by having a smaller share of residents working in

professional, scientific and technical, and administrative and waste services. Finance, insurance and real

estate (FIRE) play a larger role for Bonham residents.



Household Income

Household income is an essential variable to consider when identifying housing market segments for a

community. Bonham and Fannin County have a larger share of households in the lower middle-income

segment ($15 to $34.9K.) Many of these households are probably good rental candidates. The over $150K

segment is relatively small but represents an important target population.


Average household income is lower locally than in Texas or the U.S. overall. The overall income level,

however, is less important than the size of market segments at different income levels.



Per capital income levels locally mirror the lower household income averages.



III. Housing Data

Sources of information for the housing market include data reported through the American Community

Survey. This data is most useful for benchmarking Bonham to state and national levels. More current data

from the North Texas Real Estate Information System draws on Multiple Listing Services transactions and

gives a more focused and current picture of the housing market. Charts from both sources follow.

Bonham has a higher share of vacant housing units than is typical nationally or in Texas. This may represent

the potential to supply rental or less expensive ownership properties through a home renovation program.


Vacancy rates are high among Bonham rental properties (homes and apartments). The vacancy rates are

also higher for homes intended for ownership.



Housing Stock and Expenses

The mix of housing in Bonham is more concentrated in single family homes and small multi-unit buildings

such as duplex and 3 to 4-unit buildings. This is common in older neighborhoods such as around a historic

downtown. Bonham can build on this historic pattern by supporting new housing, especially near the

downtown that includes a mix of housing types. A mix of housing sizes in a neighborhood can permit

households to remain in the neighborhood and upsize or downsize as their life circumstances change.



The age of Bonham’s housing mix is like the U.S. overall. Significantly, there is a smaller than typical share of

homes built since 2010.


In terms of rooms (excluding bathrooms), the most common housing unit size in Bonham are four-room

houses. There is also a substantial share of five-room houses. These represent smaller, older homes that

can continue to play an important role in Bonham’s housing market.



Two and three-bedroom homes are most common in Bonham. Many of these homes are good candidates

for starter homes or rental properties.


Bonham has a higher share of rental units. Many of these are single-family homes marketed as rental

properties. This large rental segment may represent a potential supply of renovated starter homes and

higher quality rental homes if upgraded.



From the American Community Survey, results from homeowner responses show that two thirds of homes

in Bonham were valued at less than $100,000. Other data sources later in the report provide more recent

measures of home prices. This data gives a good comparison of the relative mix of home prices in Bonham

relative to the state and nation. A challenge for the Bonham housing policy will be encouraging new

investment without causing a financial shock to existing residents in more modestly priced homes.



Average mortgage payments are lower in Bonham that in Texas or the U.S. This partly reflects the smaller

and older housing stock in Bonham.


The lower mortgage rates translate into overall lower ownership costs for Bonham home owners. More

than half of Bonham homeowners are paying less than 20 percent of their income to maintain their home

(this includes mortgage, insurance, taxes, utilities and home association fees.) This does not necessarily

imply that many households in Bonham have significant extra income available to pay for larger, new

homes.



Rent paid by Bonham renters is generally lower than in Texas and the U.S. Ninety-one percent of renters

are paying less than $1,000 monthly. Rents over $1,500 a month were not represented in the most recent

survey data.



Even though rents in Bonham tend to be lower than in Texas, for many residents, these payments are

taking up a large share of their income. Seventy-six percent of Bonham residents are paying more than 25

percent of their income on rent compared to 60 percent in Texas.



Building Permits

Home construction in Bonham appears to be at the lowest level in many decades. Based on single-family

home permit data from the Census Bureau, the recent business cycle has seen the fewest new home

permits since 1980. Since 2008, an average of only eight new home permits have been issued in Bonham.

This is one half to one third the number seen in past business cycles.

Source: Axianomics, LLC analysis of U.S. Census Bureau building permit data.

Multifamily permits are also much lower during the current business cycle. The city has seen an average of

only four multi-family units permitted annually since 2008.



The value of new single-family home permits has increased steadily each business cycle since 1980. The

average permit value exceeded $134,000 in this most recent business cycle. These values are exceeding

existing home appraised values as reported below.


The American Community Survey data showed that Bonham’s housing values were skewed toward the

lower end of the distribution. Even so, appraised market values for Bonham homes have increased in recent

years. This followed several years where values were not significantly higher than at the start of the Great

Recession in 2008.

Source: Axianomics, LLC analysis of Fannin Central Appraisal District Certified Value Summaries.


Existing home sales prices in Bonham, defined as ZIP code 75418, have been increasing rapidly. These

existing home sales prices are higher than appraised values and higher than many new home permit values

in recent years. While this may be putting pressure on many local home buyers, it reflects the pressure of

steady demand and too little supply.

Source: Source: Axianomics, LLC analysis of NTREIS data..

In Fannin County, average existing home sales prices have been running consistently higher than in

Bonham, even as Bonham prices gained quickly in the last year.

Source: Source: Axianomics, LLC analysis of NTREIS data..


Residential Investment

A look at building permit values confirms the recent underinvestment in housing in Bonham. The total value

of new housing permits during the current expansion is half what was seen in the previous expansion.


When presented in terms of annual average investment by business cycle, the level of underinvestment in

Bonham housing is even more dramatic. Annual residential investment has been only about one third of

the value seen in the last expansion.



Home Sale Statistics

The volume of home sales has increased some in the last four years. Sales in Bonham have been gradually

growing each year and exceeded sales in the rest of Fannin County in the first quarter of 2018. These stable

numbers indicate that the market should be able to support sales of new homes, depending on how they

are priced.

In the last four years, the supply of existing homes for sale in Fannin County has steadily decreased. This

decreasing supply represents a housing market that is experiencing more demand than can currently be

met. Months’ supply is based on average sales in the previous 12 months with no new listings.

Source: Axianomics, LLC analysis of North Texas Real Estate Information System data.


Our final housing market statistic is days on the market (DOM) for existing homes for sale. DOM has

decreased in the last few years, but not significantly in the last two years. Pricing and seller expectations

may be a factor. Another potential explanation is that existing homes do not meet the size or amenity

expectations of current shoppers.

Source: Axianomics, LLC analysis of North Texas Real Estate Information System data.

bonham housing action plan€¦ · bonham housing action plan current conditions statistical...

Documents