You’ve heard the adage “If it bleeds, it leads.” That is, reporters cover plane crashes, not landings.
True to form, just about every media outlet has made a jaw-dropping story about house hunting in the pandemic era, with rare listings, bidding wars and investors making life miserable. to ordinary people who just need a place to live. We at The real deal certainly have.
So I was shocked when a friend started sending me condo ads he was looking at in and around Dallas and San Antonio. Many nice one and two bedroom rooms in gated communities with low monthly fees, a communal pool, covered parking, and private balconies were asking $ 100,000 to $ 135,000.
Some were even cheaper. At Cambridge Park Condominiums in Dallas, a 793 square foot one bedroom newly remodeled with stainless steel appliances was priced at $ 85,000. Mortgage payments, insurance, property taxes, and homeowners association fees combined were just $ 782 per month.
I don’t need a condo in Texas, but the deal was so good I almost made an offer.
There is no blood in this story. This is a landing, not a crash. If we report the frenzied auctions in Austin and the homeless in Los Angeles, shouldn’t we be covering the markets where homeownership is still cheap?
I am not dismissing the affordability issue. It is a major issue for the real estate industry and the nation. We constantly read about rental charges, housing insecurity and evictions. Yet now, thanks to my friend from Texas, I get daily listings of quality homes at low prices in major metropolitan areas.
I called Alex Schwartz, professor of urban policy at the New School, to help me figure it out.
“It is certainly true,” he said, “that in all housing markets you have to pay half a million dollars or more.”
But how could condo apartments in Dallas cost a third the price of condos for your car in New York?
To begin with, Schwartz noted the difference in construction and land costs. âPrices in Texas have always been lower than in other areas, in part because of the lack of regulation,â he said. “These are very sprawling places.”
Maybe the ads I saw were for homes far from the city center, reducing their value, he suggested.
I checked the unit for $ 85,000. It’s 12 miles from the downtown Dallas Historic District, which is 22 to 45 minutes by car (or 48 by bus) during Monday rush hour, according to Google. Not terrible. And my friend can work from home, at least for now, so the commute doesn’t matter.
Sprawl is cheaper than dense areas for many reasons, the lack of neighborhood amenities is one of them. You won’t find pretty restaurants near Cambridge Park Condos – or a park, for that matter. Zillow considers it “fairly walkable”, but there isn’t much to walk: Little Caesars, a pool hall, a Pakistani cafe in a mall. But these are my friend’s kind of places. He’s not a French bistro type guy.
Local schools also affect house prices. Was this the problem? I checked out Audelia Creek Elementary. There are 15 teachers per student (average salary: $ 56,627), but only about 30% of its 660 students are âcompetentâ on standardized tests. That’s 56% black, 37% Hispanic, 3% Asian and 2% white. Audelia Creek is not a school that realtors will present in their marketing.
Poor test scores don’t mean a school is bad. Invariably, they mean the children are poor. That’s certainly true in Audelia Creek, where 86 percent are eligible for a free or discounted lunch. But people judge schools by test scores, and low scores depress local house values. It might be more accurate to say that low home values ââdepress test scores because they attract low income families. The $ 85,000 condo was previously rented for $ 900 per month.
Census data shows the neighborhood is more racially balanced than its elementary school. Unfortunately, as is often the case in neighborhoods of color, white families avoid local public schools. But in the case of my friend, it is irrelevant. He has no children.
What makes Cambridge Park condos so inexpensive? One of its nine buildings burned down a few years ago and was razed to the ground. Its two tennis courts need to be redone and a net is missing. But the pool looks good, a property manager maintains the grounds, and Google reviews say it’s calm and diverse, and residents look after each other.
However, many of the units in this condo development and others nearby appear to be rented out. My friend said he didn’t want to live among the tenants because âthey don’t have an interest in the propertyâ. I reminded him that he is a renter and pays $ 1,200 a month in Austin. He replied that two neighboring tenants are addicted to methamphetamine.
My friend, 55, struggled to find accommodation as a youngster in Brooklyn without a college degree. He rented a small, illegal basement on East 28th Street, but ruined his finances by betting on horse races and calling 900. He rented a room at the YMCA in Park Slope. He lived for a while in his Chevy Nova, which eventually caught fire and smoldered for weeks.
Then he moved to Texas. Like in Brooklyn, he jumped from job to job and had occasional run-ins with law enforcement, but never wanted decent housing. He lived in West Texas, where houses cost about as much as cars, then got married and bought a three-bedroom house between Austin and San Antonio, where he fed deer in his backyard. . His wife handled the mortgage process, but that was in the mid-2000s when anyone with a pulse could get a home loan.
After 12 years, he divorced, sold the house for $ 125,000, and walked away with $ 10,000. It didn’t last. His rent in Austin consumed half of his salary, and careless expenses ate the rest. Soon he aspired to become a homeowner. “I am wasting my money on rent,” he would tell me. âI make my landlord rich. “
Many of the 38 percent of Americans who rent have had the same thought. But a huge obstacle traps them in the rental, as the professor pointed out. âThere is a lot of housing that is relatively affordable,â Schwartz said, âif you have the down payment.â
Most Americans saved less than three months of living expenses. A quarter has no savings at all. Among lower incomes, who tend to be renters, the numbers are even worse.
Low wages are a big part of the problem, but so too is financial illiteracy. A housekeeper I know was paying 19% interest on four-digit credit card debt because she didn’t want to touch her savings account which was earning 0%. My cousin invested an inheritance in money. Her sister rushed into personal bankruptcy. Credit card ads glorify consumers charging a storm, as if no bills will ever come.
My friend from Texas raided his retirement fund three times to buy gifts and furniture and invest in baseball cards, and assumed the IRS wouldn’t tax withdrawals. He thought about buying parts that were advertised on late night television. He checked his credit score daily, but lived paycheck to paycheck, unaware that mortgage lenders wanted a 20% down payment.
Between low-paying jobs, a lack of financial education, and a credit industry capable of separating ordinary people from their money, even people who manage to buy a home can lose it. About 1 in 20 mortgages are in arrears.
After five decades of bad luck and bad decisions, my friend still has a shot at home ownership. Despite all the talk that housing is unaffordable, in many places it is accessible and even cheap, without price control and profit limits. A median-priced home in Pittsburgh costs $ 175,000, which is affordable for a household earning $ 38,000. It’s a similar story in Oklahoma City, Cleveland, Louisville, and Memphis. North Texas can’t be far behind.
The real estate industry is just as hungry for profit in these markets as it is in New York and San Francisco, where prices are high, where policymakers have hung on to rent controls for decades. Addressing important issues – exclusionary zoning, income inequality, bureaucracy, financial ignorance – will make housing affordable in even more places. We can’t all move to Dallas.