Sweet Home, Texas

On Sept. 16, Zillow’s Housing Roadmap to 2016 tour stops in Houston, one of America’s fastest-growing cities and also — mostly — one of its most affordable. But despite its successes, Houston is not immune to the many challenges facing other rapidly growing American cities, including rising income inequality, emerging rental affordability concerns and ongoing efforts to diversify its economic base.

In advance of our visit, Zillow Research will be publishing a series of Houston-focused research briefs aimed at shedding light on some of the unique trends we’re observing in the area. All of our Houston research can be found here, and we encourage you to please join us on Sept. 16 if you can. If you can’t, please join in the conversation on social media with the hashtag #HousinginAmerica.

Members of the band Lynyrd Skynyrd probably weren’t focused on housing markets, or else they might have titled their 1974 hit “Sweet Home Alabama” a little differently. Because Texas’ markets, not Alabama’s, are generally home to the sweetest mixes of affordable housing and job growth.

But the sweetness that characterized Houston’s housing market, in particular, in the early years of this decade has begun to sour just a bit as job growth slows and affordability suffers.

Several months ago we compared employment growth, income growth and housing affordability across metro areas, and classified U.S. housing markets into four groups:

• Boomtowns – cities where jobs are plentiful, but housing is expensive
• Bust towns – cities where housing is affordable, but jobs are scarce
• Sour spots – cities where housing is expensive and jobs are scarce
• Sweet spots – cities where jobs are plentiful and housing is affordable

We've now conducted the analysis over time, as well. Texas metros figure prominently on the list of consistently sweet spots where, for much of the past half-decade, employment and incomes have been growing robustly and housing has remained remarkably affordable (figure 1).[1]

But while many Texas metros – particularly Houston – have ranked consistently as “sweet spots” over the past few years, the years from 2011 through 2013 were very different from 2013 through 2015.

We also plotted the evolution of the relationship between price-to-income ratios and the pace of employment growth over the past few years in several metro areas (figure 2). In Houston, the years from 2011 through 2013 were characterized by accelerating employment growth and essentially no deterioration in affordability. But the more recent period from 2013 through 2015 has been characterized by a deterioration in mortgage affordability and slowing employment growth.

Still, compared to the other large metro areas shown, Houston remains extraordinarily 'sweet.'

[1] The income data should be interpreted with caution since income data reported in the Current Employment Statistics are particularly volatile and not ideal for comparisons over time.