The price is not right

Texas first-time buyers need $10,000 more to afford a home this year

Texas first-time buyers need $10,000 more to afford a home this year

Home for sale sign
Texans now need $10,000 more in income to be approved for a $229,000 house. Photo by fstop123/Getty Images

The hurdles are raised for first-time homebuyers in Texas yet again, as rising interest rates demand an overall higher income for mortgage approval.

The Texas Real Estate Research Center released findings in its recent Texas Housing Affordability Outlook that Texans buying their first homes need $10,000 more in income than at the beginning of last year to be approved for a $229,000 house.

Purchasing power, the center explains, and mortgage interest rates are indirectly related. Higher interest means higher monthly payments; it takes a higher income to keep up. “... As long as the rise in home prices continues to outpace the increase in income, purchase affordability, or the ability of a household to buy a home, will continue to diminish,” explains the report.

The $229,000 figure represents the first-quartile home price in Texas in Q1 2022, described as "the highest home price among those lowest-priced 25 percent of homes sold" in the state. The state's median home price for the first quarter of 2022 was $319,000. Year-over-year growth was slightly higher for the median figure (18.4 percent) than first-quartile figure (17.5 percent), but both are at their highest rates since the beginning of the chart in 2012.

San Antonio’s first-quartile home price sat slightly above the state average, at $235,000, while the area's median home price for the first quarter came in at $305,000. The Austin-Round Rock area is a large contributor to the statewide growth, with a 29.2 percent change in first-quartile prices, up to $420,000. Dallas’ numbers are a near match to the state's figures, and Houston’s are just slightly below.

Unfortunately for many Texans currently renting, only 37.4 percent of them are making the qualifying income ($61,652) to buy one of those first-quartile homes with a 3.4 percent interest rate (that was the national interest rate at the beginning of the year; by mid-May the interest rate had risen to 5.25 percent). In San Antonio, only 32.5 percent of area residents are in a similar position, necessitating an income of $63,236. This is nearly twice the qualifying income required for a first-quartile home in 2011 ($23,142).