New U.S. Census On Area Housing,Traffic, Employment

The State of Housing

In June of this year, the Joint Center for Housing Studies at Harvard released the 2015 edition of their annual report, “The State of the Nation’s Housing.” Available here, the report highlights several national trends in housing, namely growth in housing construction but declines in homeownership rates. It also shows increases in the prevalence and cost of renting. Building on the analysis in that report, we here at CAPCOG thought we’d take a closer look at how the housing market for the Austin Metro Area is changing over time.

Looking toward the figure at the right, homeownership rates in Austin are lower than state and national rates. Historically, this has been the case, and as homeownership rates tend to increase with age, some of this difference is likely attributable to Austin’s relative youthfulness as a city. In 2013, the Austin MSA’s median age was 33.5, compared to 37.5 nationwide. That corresponds to fewer household heads who have reached prime home-buying age.

Shifting to look at the trend, rather than the relative levels, the Austin MSA may not be neatly conforming to national patterns. Most notably, homeownership rates have increased in 4 of the 6 years between 2007 and 2013. Declines between 2008 and 2010 are likely attributable to the Great Recession rather than local economic conditions, meaning the MSA is not seeing the steady declines in homeownership rates that have been prevalent at the state and national levels over the last several years. Time will tell if this pattern reflects a long-term move toward higher homeownership rates in the Austin MSA or simply a relatively stronger housing market at present.

The overall homeownership rate masks considerable variation in homeownership trends among Austin’s different age cohorts. Focusing on theperiod from 2005-2013, data in the figure below show the Great Recession was hardest on Gen Xers—those between the ages of 35 and 44, who saw homeownership rates fall by roughly 8 percent between 2008 and 2011. However, that group has rebounded strongly since 2011, adding nearly 5 percent to its homeownership rate between 2011 and 2013.

The youngest age cohort — those between 25 and 34 — saw a significant decline in homeownership rates due to the Great Recession, but unlike several older cohorts, they have yet to see rates rebound. Possible explanations for this include: 1) rising home costs in and tightening credit requirements have made it more difficult to buy one’s first home, and 2) millennials, whose general preference for living in more urban areas makes them less likely to own, given that condos in Central Austin are not priced as starter homes.

Older age cohorts have generally seen more stability in Austin’s housing market. It is worth noting each of these cohorts has seen a decline in homeownership since 2005.

The 2005-2013 period in the Austin Metro also has  seen dramatic uptick in the rental market. Over that 8-year span, the number of rental units in the Metro area increased by more than 27 percent, exceeding 300,000 in 2013. At the same time, the number of vacant available for rent declined by 39 percent from 2005 to 2013.  In other words, though supply has expanded, demand has grown faster than supply, resulting in a more competitive market for renters.

This competition has caused rents in the city to grow at a rapid pace. The median rent has risen by nearly 35 percent to $1,000 in 2013. Those figures do not account for inflation, but controlling for inflation would not eliminate the trend.

The rise in rents is notable largely for how far it exceeds growth in household incomes. Median monthly housing costs, which include homeowners, largely track with incomes, but rents have grown more quickly.

This trend has considerable policy implications as the area attempts to deal with housing affordability. For one, efforts to make housing more affordable must consider rental markets, in addition to home-ownership. Policies which allowed for the expansion of rental supply would provide relief to those being hit hardest by increasing housing costs. In fact, availability of affordable housing is a national issue. The Urban Institute and City Lab recently noted “without exception, there’s no county in the U.S. that has enough affordable housing.” (You can read the whole article here.) Lack of affordable housing and rising rents make it increasingly difficult for households at the lower end of the wage spectrum to save enough money to buy a home.

Putting each of these pieces together, the state of housing in the Austin MSA is somewhat mixed. On the one hand, homeownership has rebounded from the recession and is rising at a time when rates are falling statewide and at a national level. Given the importance of housing as an economic driver and the role houses play as investment and savings vehicles for households, this is a really positive economic sign for the region. On the other hand, rents are rising faster than incomes, making it increasingly difficult for many lower-income households to become homeowners. And the 25-34 age cohort, who is most likely to be buying a home for the first time and are in need of a low-cost option, have seen homeownership rates drop considerably in the last decade. Putting it succinctly, the growth in Austin’s housing market has been good, but changes at the low end of the market are needed to make it good for everyone.

After some delay, the Census Bureau has updated its popular “On the Map” data product to include data for 2012. The product uses the “Longitudinal Employer-Household Dynamics” allow analysis of a wide range of topics, including employment and housing densities, commuting patterns, and earnings by geographic area.

The figure to the right is a map of residential densities for Travis County workers. In other words, the figure maps where people who work in Travis County live. Analysis is done at the census block level and care is given to complying with Census Bureau privacy requirements.