Despite the “economic recovery” celebrated in the media since 2010, many Americans continue to struggle financially. Millennials are particularly finding it hard to earn a good living, as many continue to live at home with their parents while trying to pay off student loan debt. Over half of Americans don’t even have $1,000 in savings. The housing market began showing signs of slowdown in 2018, which should mean it’s shifting back to a buyer’s market, but mortgages and rents remain high.
Renting or Buying in Texas
These conditions have caused many individuals and families to rethink the American dream and choose renting over buying, at least until their financial situations turn around. For these reasons, many people are moving to the more affordable state of Texas to rent or buy. Using a guide such as Richardson TX apartments, it’s easy to find better deals in the Lone Star State than homes on the west or east coast.
Another alternative to the high cost of living is buying cheap land in West Texas or investing in a mobile home. Any of these solutions beat paying high prices in California for food, gas and other living expenses if budget is your top concern.
Advantages of Living in Texas
- lower living costs compared with most states
- no corporate income taxes for business owners
- individuals do not have to pay state income tax
- homeowners do not have to pay state property tax
- warm or mild climate most of the year
- wide open space creating a greater sense of freedom
- ideal for great outdoors activities
- stable job market
- plenty of sports and entertainment
Even people who earn six figures are finding it difficult to afford California’s high costs and taxes, so thousands are moving to Texas, where the dollar goes further. It’s part of the reason Texas is the fastest growing state by population in the United States.
Why Renting Is Growing in Popularity
Texas does not have a state property tax for homeowners, but homeowners still have to pay high taxes on real estate at the local level. This tax rate is 1.9%, as a $250,000 home requires an annual tax of $4,828. People who live paycheck to paycheck and can’t afford to put money in savings have a hard time paying this amount, which is one of several reasons why rent is becoming increasingly more attractive in Texas.
Unlike California or New York, Texas has a low cost of living, which allows you to put more money in savings. This economic climate makes it feasible to rent comfortably while you’re saving up for a downpayment to buy a home. For those individuals who simply cannot afford to even save money due to low income, renting is more practical than trying to borrow money for an investment.
One of the reasons why over 40% of the residents of Houston are renters is that the city has had a history of hurricanes. Flooding damage from 2017 that cost billions to repair is a reminder that it’s more practical for residents near the Gulf of Mexico to rent in case they need to evacuate in the future.
Exploring Texas Markets
To many people outside of Texas, the state conjures up images of just desert, cowboys and oil. But Texans see beyond these stereotypes, as the state has plenty of diversity. Austin, the state capital, is considered “hip” because of its big music scene. Houston is not just an oil center, but is also a leading development market for the tech industry. Dallas is the most cosmopolitan major market in the state, while San Antonio is a smaller but growing big city. The rest of the state is mainly small towns to medium-sized markets.
As in all states, some Texas markets have greater potential for investment opportunities than others. Cities with a booming job market are perfect for investors and property managers who rent to tenants. With an increasing influx of people moving from other states as well, several Texas markets are likely to keep growing in median home values, even as national home buying slows down.
Real estate market experts have pointed to Beaumont as a market where home buying is more economically sensible than renting. Money Magazine recently named Frisco, a North Texas suburb, as the “best place to live in the U.S.,” but a subsequent study by real estate research firm HomeArea.com suggested that it’s more affordable to rent there than to own. The median home price in Frisco has escalated over 70% from $235,000 in 2011 to $404,100 in 2017. Meanwhile, monthly rent has only gone up 16% in that same time frame from $1,250 to $1,450.
If you’re looking for cheap property, check is Pharr, a suburb of McAllen, which is near the Mexican border. There you’ll find that the median home value in 2018 was $71,000. But the area also has a 36% poverty rate and 12.3% unemployment rate. Dallas, by comparison, has a median home value of $129,300, a poverty rate of 24% and an unemployment rate of 9.4%.
Conclusion
Moving to Texas will definitely save you money compared with living in the western or eastern regions of the United States. The question of whether to rent or buy comes down to your savings, income and ability to make monthly payments. For more information about investing or renting, make Worthview a regular part of your real estate research.
