modeling housing affordability in corpus christi, texas christi housing affordability...in corpus...

Modeling Housing Affordability in

Corpus Christi, Texas

December 13, 2018

Overview

I. Background

II. Owner-Occupied Housing Affordability

III. Renter-Occupied Housing Affordability

IV. Future Housing Needs

V. Housing & Neighborhood Quality

VI. Conclusion

I. Background

Demographic Characteristics (2017)

City of Corpus Christi Nueces County

Population 325,600 361,221

Households 115,797 128,490

Median Family Income $63,100 $63,100

Percent of Owner-Occupied Housing Units

57% 58%

Percent of Renter-Occupied Housing Units

43% 42%

Source: Department of Housing and Urban Development, U.S. Census Bureau

Owner-Occupied Housing Stock (2017)

Property Type Number of Owner-Occupied Units in theCity of Corpus Christi

Proportion of Owner-Occupied Units in the City of Corpus Christi

Number of Owner-Occupied Units in Nueces County

Proportion of Owner-Occupied Units in Nueces County

Single-family 82,996 92.6% 94,505 90.6%

Condominium 3,620 4.0% 6,352 6.1%

Townhouse 3,042 3.4% 3,491 3.3%

Total 89,658 100.0% 104,348 100.0%Source: Nueces County Appraisal District

Spatial Distribution of Owner-Occupied Housing Stock (2017)

Source: Nueces County Appraisal District

Renter-Occupied Housing Stock (2017)

Property Type

Number of Renter-

Occupied Units in the City of

Corpus Christi

Proportion of Renter-

Occupied Units in the City of

Corpus Christi

Number of Renter-

Occupied Units in Nueces

County

Proportion of Renter-

Occupied Units in Nueces

County

1-4 30,427 61.7% 33,415 63.5%

5-9 8,630 17.5% 8,733 16.6%

10-49 6,259 12.7% 6,447 12.3%

50 or more 3,977 8.1% 4,014 7.6%

Total 49,293 100.0% 52,609 100.0%

Source: U.S. Census Bureau

Spatial Distribution of Renter-Occupied Housing Stock (2017)


Income Cohorts (2017)

Income Cohort Percent ofMedian Family Income

Income Range Percent of Households in the City of Corpus Christi

Percent of Households in Nueces County

Extremely Low Income

0 - 39% $0 - $24,600 22.9% 23.6%

Very Low Income

40 - 49%$24,601 -$31,050

6.5% 6.6%

Low Income 50 - 79%$31,051 -$49,700

17.0% 17.4%

Workforce 80 - 120%$49,701 -$75,720

19.1% 18.3%

Market-rate 121%+ $75,721+ 34.5% 34.1%


Income Cohorts by Housing Type (2017)

Income Cohort

Income Range Percent of Owner-Occupied Households in the City of Corpus Christi

Percent of Renter-Occupied Households in the City of Corpus Christi

Percent of Owner-Occupied Households in Nueces County

Percent of Renter-Occupied Households in Nueces County

ExtremelyLow Income

$0 - $24,600 16.3% 33.6% 15.7% 32.3%

Very Low Income

$24,601 -$31,050

4.9% 9.0% 4.7% 8.9%

Low Income$31,051 -$49,700

13.7% 22.3% 13.4% 21.7%

Workforce$49,701 -$75,720

19.1% 17.3% 19.4% 18.6%

Market-rate $75,721+ 46.1% 17.8% 46.8% 18.4%Source: Department of Housing and Urban Development, U.S. Census Bureau

Median Family Income in Nueces County by Census Tract (2016)


Defining Housing Affordability

• What does housing affordability measure for owner- and renter-occupied units?

Housing Affordability measures the relationship between home price or rent and

median family (or household) income.

Defining Housing Affordability

• Owner-Occupied Housing Affordability• Median family (or household) income as a percentage of

required income to qualify for a mortgage

• Calculates the required income to qualify for a particular home price based on the total monthly mortgage payment (monthly mortgage payment + additional expenses associated with homeownership)

• HAI = 1.10 means median income 10% > required income

• Renter-Occupied Housing Affordability• Rent as a percentage of median family (or household)

income (Example: Rent is 30% of median income)

II. Owner-Occupied Housing Affordability

Owner-Occupied Housing Affordability in the Corpus-Christi MSA

• Decline in owner-occupied affordability following the end of the Great Recession.

Source: Federal Financial Institutions Examination Council and Real Estate Center at Texas A&M University

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

$200,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


Median HomePrice

Median FamilyIncome

+31%

+39%

Widening gap between median home price and median family income diminishes affordability


• However, the MSA remains relatively affordable with an HAI above 1.00.

Source: Federal Financial Institutions Examination Council and Real Estate Center at Texas A&M University

1.451.33

1.42

1.731.84

1.94

2.14

1.86

1.631.79 1.74 1.80

0.00

0.50

1.00

1.50

2.00

2.50

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Ho

usi

ng

Aff

ord

abili

ty I

nd

ex

Housing Affordability Index: Corpus-Christi MSA Increasing Affordability

Median Income > Qualifying Income

Median Income < Qualifying Income

Owner-Occupied Housing Affordability in Corpus Christi vs. Other Geographies

• While affordability has declined since the end of the Great Recession, Corpus Christi is relatively affordable in comparison to other geographies.

Texas Corpus Christi

Beaumont-Port Arthur

Brownsville-Harlingen

McAllen-Edinburg-Mission

San Antonio-New Braunfels

Victoria

2011 2.04 1.94 2.40 1.68 1.58 1.98 2.12

2017 1.54 1.80 2.01 1.54 1.54 1.59 2.06

Housing Affordability Index

Source: Real Estate Center at Texas A&M University

Home Price Appreciation in the Corpus Christi MSA

• Home price appreciation increased significantly following the Great Recession.

• However, the rate of increase has slowed over the past few years

-10%

-5%

0%

5%

10%

15%

20%

198

11

982

198

31

984

198

51

986

198

71

988

198

91

990

199

11

992

199

31

994

199

51

996

199

71

998

199

92

000

200

12

002

200

32

004

200

52

006

200

72

008

200

92

010

201

12

012

201

32

014

201

52

016

201

7

Annual Home Price Appreciation in the Corpus Christi MSA, 1981-2017

Source: Federal Reserve Economic Data

Historical average: 2.7%Seven-year average (2011-2017): 3.5%

Residential Sales Activity in Nueces County

• Decline in sales of lowest-priced homes ($0-$149,999)

• Rise in sales of homes priced $150,000+ strains housing affordability for lower-income households


0%

5%

10%

15%

20%

25%

30%

2010 2011 2012 2013 2014 2015 2016 2017

Perc

ent o

f Tot

al H

omes

Sol

d

All Residential Sales in Nueces County (2010-2017)

$0 - $69,999

$70,000 - $99,999

$100,000 - $149,999

$150,000 - $199,999

$200,000 - $299,999

$300,000 -$399,999

$400,000+

Residential Sales Activity in the City of Corpus Christi

• Decline in sales of lowest-priced homes ($0-$149,999)

• Rise in sales of homes priced $150,000+ strains housing affordability for lower-income households


0%

5%

10%

15%

20%

25%

30%

35%

2010 2011 2012 2013 2014 2015 2016 2017

Perc

ent

of T

otal

Hom

es S

old

All Residential Sales in the City of Corpus Christi (2010-2017)

$0 - $69,999

$70,000 - $99,999

$100,000 - $149,999

$150,000 - $199,999

$200,000 - $299,999

$300,000 - $399,999

$400,000+

Spatial Distribution of All Residential Sales


New Residential Sales (MLS) Activityin Nueces County

• Virtually no new construction of lowest-priced homes (less than $99,999)

• Significant decline in new construction of homes priced $100,000-199,999

• Tremendous growth in new construction of homes priced $200,000-299,999


0%

10%

20%

30%

40%

50%

60%

2010 2011 2012 2013 2014 2015 2016 2017

Perc

ent o

f New

Hom

es S

old

New Residential Sales Activity in Nueces County (2010-2017)

$0 - $69,999

$70,000 - $99,999

$100,000 - $149,999

$150,000 - $199,999

$200,000 - $299,999

$300,000 - $399,999

$400,000+

New Residential Sales (MLS) Activityin the City of Corpus Christi

• Virtually no new construction of lowest-priced homes (less than $99,999)

• Significant decline in new construction of homes priced $100,000-199,999

• Tremendous growth in new construction of homes priced $200,000-299,999


0%

10%

20%

30%

40%

50%

60%

70%

2010 2011 2012 2013 2014 2015 2016 2017

Pe

rce

nt

of N

ew

Ho

me

s So

ld

New Residential Sales Activity in the City of Corpus Christi (2010-2017)

$0 - $69,999

$70,000 - $99,999

$100,000 - $149,999

$150,000 - $199,999

$200,000 - $299,999

$300,000 - $399,999

$400,000+

Spatial Distribution of New Residential Sales (MLS) Activity


Summary

• Overall, housing remains relatively affordable in Corpus Christi.

• However, the decline in the supply of new homes in the lowest price ranges diminishes housing affordability, particularly for low-income households.

What Is Affordable?

How Much Home Can A Household Afford? (2017)

Source: CoreLogic, Real Estate Center at Texas A&M University

Assumptions:• Interest Rate: 4.28%

• LTV: 89.5%

• Qualifying Ratio: 39.75%

• Annual Expenses (Taxes, Property Insurance, and Utilities): 6.00% of Home Value

How Much Home Can A Household Afford? (2017)

Source: CoreLogic, Real Estate Center at Texas A&M University

Family Income Maximum Home Price Affordable

$20,000 $70,357

$30,000 $105,536

$40,000 $140,714

$50,000 $175,893

$60,000 $211,071

$70,000 $246,250

$80,000 $281,429

$90,000 $316,607

$100,000 $351,786

How Much Home Can A Family Afford? (2017)Income Cohort Income Range Range in

Maximum Home Price Affordable

ExtremelyLow Income

$0 - $24,600 $0 - $86,539

Very Low Income

$24,601 -$31,050

$86,540 -$109,229

Low Income$31,051 -$49,700

$109,230 -$174,837

Workforce$49,701 -$75,720

$174,838 -$266,372

Market-rate $75,721+ $266,373+

Source: U.S. Department of Housing and Urban Development, CoreLogic

Supply and Demand of Owner-Occupied Housing in Nueces County Based on Total Housing Stock (2017)

Income Cohort

Family Income

Range of Maximum

Home Price Affordable

Percent of Owner-

Occupied Households

Percent of Owner-

Occupied Units

Over or (Under) Supply

ExtremelyLow Income

$0 -$24,600

$0 - $86,539 16.3% 22.9% 6,892

Very Low Income

$24,601 -$31,050

$86,540 -$109,229

4.9% 9.7% 5,046

Low Income$31,051 -$49,700

$109,230 -$174,837

13.7% 30.5% 17,515

Workforce$49,701 -$75,720

$174,838 -$266,372

19.1% 22.8% 3,855

Market-rate $75,721+ $266,373+ 46.1% 14.2% (33,307)

Source: U.S. Department of Housing and Urban Development, CoreLogic, Nueces County Appraisal District, Real Estate Center at Texas A&M University

Supply and Demand of Owner-Occupied Housing in the City of Corpus Christi Based on Total Housing Stock (2017)

Income Cohort

Family Income

Range of Maximum


Percent of Owner-

Occupied Households

Percent of Owner-

Occupied Units


ExtremelyLow Income

$0 -$24,600

$0 - $86,539 15.7% 21.6% 5,251

Very Low Income

$24,601 -$31,050

$86,540 -$109,229

4.7% 10.1% 4,804

Low Income$31,051 -$49,700

$109,230 -$174,837

13.4% 32.8% 17,356

Workforce$49,701 -$75,720

$174,838 -$266,372

19.4% 23.7% 3,915

Market-rate $75,721+ $266,373+ 46.8% 11.8% (31,326)


But wait!

Supply and Demand of Owner-Occupied Housing in Nueces County Based on MLS Sales (2017)

Income Cohort

Family Income

Range of Maximum


Percent of Owner-

Occupied Households

Percent of Owner-

Occupied Units


ExtremelyLow Income

$0 -$24,600

$0 - $86,539 16.3% 9.6% (6,951)

Very Low Income

$24,601 -$31,050

$86,540 -$109,229

4.9% 6.4% 1,648

Low Income$31,051 -$49,700

$109,230 -$174,837

13.7% 27.0% 13,836

Workforce$49,701 -$75,720

$174,838 -$266,372

19.1% 32.6% 14,076

Market-rate $75,721+ $266,373+ 46.1% 24.4% (22,608)


Supply and Demand of Owner-Occupied Housing in the City of Corpus Christi Based on MLS Sales (2017)

Income Cohort

Family Income

Range of Maximum


Percent of Owner-

Occupied Households

Percent of Owner-

Occupied Units


ExtremelyLow Income

$0 -$24,600

$0 - $86,539 15.7% 9.8% (5,335)

Very Low Income

$24,601 -$31,050

$86,540 -$109,229

4.7% 6.7% 1,782

Low Income$31,051 -$49,700

$109,230 -$174,837

13.4% 28.6% 13,624

Workforce$49,701 -$75,720

$174,838 -$266,372

19.4% 34.7% 13,744

Market-rate $75,721+ $266,373+ 46.8% 20.2% (23,815)


Summary

Affordability:

• The highest income cohort faces a supply shortage of owner-occupied units.

• This would suggest that households in the highest income cohort are “buying down”—i.e., they are purchasing lower-priced homes.

Availability:

• The lowest and highest income cohorts face a supply shortage of owner-occupied units.

• The lowest income cohort must spend relatively more to purchase a home.

Where Is the Supply of

Housing by Income Cohort?

Spatial Distribution of Homes Affordable toEach Income Cohort (2017)


Where Do Homebuyers

Purchase Homes?

Home Purchase Originations in Nueces County (2011-2017)

Type of LoanNumber of

LoansPercent of

LoansMedian Loan

Amount

Median ApplicantIncome

EstimatedMedian Price-

to-Income Multiplier

Conventional 10,752 52% $161,000 $90,000 2.52

FHA-insured 6,294 30% $151,000 $63,000 2.60

FSA/RHS-guaranteed

10 0.05% $86,000 $52,000 1.79

VA-guaranteed

3,671 18% $198,000 $78,000 2.76

Total 20,727 $164,480 $79,657 2.59

Source: Consumer Financial Protection Bureau

Average loan-to-value ratio: 89%

Home Purchase Originations in Nueces County by Income Category (2011-2017)

• Majority of home purchase originations are for market rate housing (households earning greater than 120% of the median family income)

• In essence, homeownership is not an option for extremely low or very low income households (households earning less than 50% of the MFI)

Income CohortNumber of Home

Purchase OriginationsPercent of Home

Purchase Originations

Extremely Low Income 24 0.1%

Very Low Income 375 1.8%

Low Income 2,308 11.2%

Workforce 5,447 26.4%

Market-rate 12,472 60.5%Source: Consumer Financial Protection Bureau

Home Purchase Originations by Census Tract (2017)

Source: Consumer Financial Protection Bureau

III. Renter-Occupied Housing Affordability

An Overview of Renter-Occupied Housing Affordability

• The Department of Housing and Urban Development (HUD) defines cost-burdened households as those who spend more than 30% of their income on rent.

• We have adopted this methodology into our calculations of renter-occupied housing affordability.

How Much Rent Can A Family Afford? (2017)

Income Cohort Family Income ($) Monthly Rent Affordable ($)

Extremely Low Income $0 - $24,600 $0-$615

Very Low Income $24,601 - $31,050 $616-$776

Low Income $31,051 - $49,700 $777-$1,243

Workforce $49,701 - $75,720 $1,244-$1,893

Market-rate $75,721+ $1,894+

Median rent in Corpus Christi: $970

Source: Department of Housing and Urban Development

Supply and Demand of Renter-Occupied Housing in Nueces County (2017)

Source: U.S. Census Bureau, Department of Housing and Urban Development

Income Cohort

Family Income

Monthly Rent Affordable

Percent of Renter-

Occupied Households

Percent of Renter-

Occupied Units

Over or (under)supply

ExtremelyLow Income

$0 - $24,600 $0-$615 33.6% 20.5% (6,892)

Very Low Income

$24,601 -$31,050

$616-$776 9.0% 14.1% 2,692

Low Income$31,051 -$49,700

$777-$1,243 22.3% 34.4% 6,359

Workforce$49,701 -$75,720

$1,244-$1,893 17.3% 23.2% 3,112

Market-rate $75,721+ $1,894+ 17.8% 7.8% (5,271)


Supply and Demand of Renter-Occupied Housing in the City of Corpus Christi (2017)

Source: U.S. Census Bureau, Department of Housing and Urban Development

Income Cohort

Family Income

Monthly Rent Affordable

Percent of Renter-

Occupied Households

Percent of Renter-

Occupied Units

Over or (under)supply

ExtremelyLow Income

$0 - $24,600 $0-$615 32.3% 19.8% (6,148)

Very Low Income

$24,601 -$31,050

$616-$776 8.9% 14.2% 2,619

Low Income$31,051 -$49,700

$777-$1,243 21.7% 34.4% 6,216

Workforce$49,701 -$75,720

$1,244-$1,893 18.6% 23.7% 2,469

Market-rate $75,721+ $1,894+ 18.4% 7.9% (5,156)


IV. Future Housing Needs

Population Growth

• The expected population of Nueces County is 374,157 people by 2020 and 407,534 people by 2030 (average annual growth of 0.89 percent).

• Since 2005, the average household size has hovered between 2.64 and 2.78. Assuming an average household size of 2.71, the County needs, on average, 1,230 additional housing units each year to keep pace with population growth.

• Over the past seven years (since the recovery from the Great Recession), building permits averaged 1,441 annually.

Source: Texas Water Development Board

Building Permits in Nueces County

0

500

1000

1500

2000

2500

3000

3500

4000

198

0

198

2

198

4

198

6

198

8

199

0

199

2

199

4

199

6

199

8

200

0

200

2

200

4

200

6

200

8

201

0

201

2

201

4

201

6

Nu

mb

er o

f P

erm

its

Single family units

Multifamily units


Single-Family Median Lot Size Fairly Constant

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

YEAR BUILT

Median Lot Size (SF) by Year Built


Increase in Single-Family Median Living Area

-

500

1,000

1,500

2,000

2,500

YEAR BUILT

Median Living Area (SF) by Year Built


What Does This Mean?

• Median Single-family Lot Size – Since 1992 builders have reduced median lot by 1,121 SF• 1992: 7,983 SF

• 2016: 6,862 SF (-14.0%)

• Median Single-family Living Area – Since 1992 builders have increased median living area by 206 SF• 1992: 1,746 SF

• 2016: 1,952 SF (11.8%)

• To supply affordable housing, builders may have to reduce lot size or living area.

V. Housing & Neighborhood Quality

But Wait!

• Thus far, we have ignored housing and neighborhood quality.

• However, just because a home is affordable does not mean that it is of adequate quality or that it is located in a neighborhood with access to good schools, jobs, healthcare, amenities, etc.

• Housing and neighborhood quality is more likely to be an issue for lower-income households.

Why Is This Topic Important?

• Place matters: the neighborhood in which a household resides significantly effects the opportunities and life outcomes of that household.

• Homeownership in high-quality neighborhoods, which offer households access to better schools, jobs, health care, and amenities and reduces exposure to crime, is more likely to enhance the opportunities and life outcomes of that household.

• However, low-income households are less likely to be able to afford homeownership in high-quality neighborhoods.

Neighborhood Matters

Limited financial

resources, lower

educational status

Faces lower access to

good schools, jobs, and

health care; higher

exposure to crime

Resides in a neighborhood

of poorqualityLow-

income household

Resides in a high-quality

neighborhood

Faces greater access to good schools, jobs,

and health care; lower exposure to

crime

Fewer opportunities

for upward mobility;

lower household outcomes

More opportunities

for upward mobility; improved household outcomes

Age of Owner-Occupied Housing


Travis County - Land Value & Location

$0

$20

$40

$60

$80

$100

$120

$140

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

$35.0

$40.0

$45.0

MEDIAN IMPROVEMENT VALUE PSF

MEDIAN LANDVALUE PSF

Single Family 2017 Appraised ValueBy Year Built

Median Land Value PSF Median Improvement Value PSF

Travis County - Land Value & Location

Single Family Land >= $25 PSF

Single Family Land < $7 PSF

Nueces County - Land Value & Location

$0

$20

$40

$60

$80

$100

$120

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

$4.5

$5.0

MEDIAN IMPROVEMENTVALUE PSF

MEDIAN LANDVALUE PSF

Single Family 2017 Appraised ValueBy Year Built

Median Land Value PSF Median Improvement Value PSF

Nueces County - Land Value & Location

Single Family Land >= $4 PSF

Single Family Land < $3 PSF

Summary

• Gentrification makes housing unaffordable for longtime residents with lower income

• In Corpus Christi:• Higher value homes are located next to water or in the

suburbs.

• Lower value homes are located near downtown closeto the most jobs

• Increasing the housing quality and access to opportunities (i.e., good schools, jobs, healthcare) of homes close to downtown could improve household outcomes for low-income households.

VI. Conclusion

Final Thoughts

• Huge strain on housing affordability for the lowest income cohort (extremely low income families).

• Declines in the construction of new single-family homes affordable to the lowest-income cohort will worsen affordability.

• Highest priced homes are in the suburbs.

• Final thought: how can we increase the supply of affordable housing while enhancing neighborhood quality?

Thank you!

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