Taxes, insurance take shots at affordability
December 9, 2002
Rising costs could cancel the benefits of ultra-low interest rates in Texas
Inman News Features
As home mortgage rates have hit historic rock-bottom levels, it seems reasonable to assume homes are more affordable now than in the past.
This is not the case though in many states and especially in Texas, where the skyrocketing cost of homeowners insurance coupled with increasing property taxes has largely offset any positive effects of low interest rates on housing affordability, according to Jack C. Harris, research economist with the Real Estate Center at Texas A&M University.
Harris has compiled the Texas housing affordability index for several years and recently revised the index to account for the state's unprecedented increases in insurance and taxes by using property tax rate averages and benchmark insurance rates for each Texas market rather than national data.
The third quarter index stands at 1.07, almost unchanged from the same quarter last year. Harris even points out that Texas homes now are less affordable than they were in 1999 when the index was 1.24.
The Real Estate Center at Texas A&M reported that insurance companies with the largest shares of the state's market have either stopped or restricted writing new homeowners policies and raised rates for renewals.
In addition, Harris said that property tax assessors are raising valuations based on higher sales prices, so property taxes are taking a bigger bite of homeowners' incomes.
Overall, Harris' research indicates that Texas homes remain affordable, with an estimated 54 percent of households able to afford the median priced home last quarter. Affordability in today's market largely matches that of the early 1990s.
The Real Estate Center at Texas A&M was created by the state legislature and is primarily funded by Texas real estate licensee fees.
Copyright: Inman News Service