Home Ownership Affordability

It’s no secret that the home prices in the Austin-Round Rock metro have skyrocketed since the panedmic.  While they have come back down into a more realistic realm, for many the prospect of owning a home doesn’t exist today. More than prices it’s interest rates that have impacted buyer affordability and market activity the most. Gone are the days of 3% mortgage interest. Rates have been increasing since 2022, and in October 2023 were up to 7.64%.

How do we define affordability? A standard measure is percentage of income going towards PITI (principal, interest, taxes and insurance) Historically 28-30% of income was a standard measure. The median sold price home this month = $474,705; with a 20% down payment at an interest rate of 7.1%, the monthly payment would be $3,711. The household income required for that would be $146,275 per year and would represent 43.35% of monthly income. And that median price is the entire metro. The City of Austin is even more expensive. The following charts show the affordability for the 41 zip codes in Austin. 35 or 85% of them are deemed unaffordable. If you want to see the affordability charts for your zip code outside of Austin go to: Affordability and scroll down.

We know the problem, but what’s the solution? Keep reading.

Austin’s HOME Initiative program is meant to address this issue. Phase I approved in December 2023 allowed for up to 3 dwellings to exist on a single lot zoned SF-1, SF-2, SF-3. Phase II is set to be decided upon by the city council when it meets on May 16th. Essentially higher density zones is what is being considered. Even higher than what was approved in December. Now the council is considering reducing the minimum lot size requirement from 5000 sq ft, to 2000 sq ft. The intent is to allow for construction of more smaller single family homes that would create more options for the missing-middle buyers. The plans also call for the development of walkable mixed-used neighborhoods where various housing options would exist along with transit, retail, entertainment etc.

Sometimes solving one problem, creates others. At issue here is parking, more STR’s, loss of the “McMansion” rule, which could mean bigger, taller buildings potentially next to single family dwellings. Lots to be decided and worked out for sure.

For more information :HOME Initiative​ Phase II​