14th Sep, 2012

How Incomes Effect Texas Hill Country Real Estate Market

A variety of real estate investors in Texas Hill Country hale from local counties, nearby Metropolitan areas, and other far-flung localities. Large-acreage Texas ranches in Hill Country are purchased as investments, development land, and working ranches and farms. The diversity of landowners helps to stabilize prices for real estate in Fredericksburg, Kerrville, and other small towns in the region.

According to the Real Estate Center at Texas A&M University, there is a strong correlation between family incomes in the $50,000-$200,000 bracket and homes priced from $100,000-$300,000. Lower priced single-family homes in Fredericksburg and Gillespie County are affected by this “Income Factor,” as discussed by Ali Anari in his article published by in the Tierra Grande Magazine. Anari Claims that home prices, in the short run, are determined by supply and demand, the availability of credit, and interest rates. However, he says,”Family income is the single most fundamental factor in determining home prices” over the long term.

Property owners and comes must be able to cover the costs of home ownership. That is why prices eventually revert to the values determined by family incomes. Real Estate Center studies relationships between home prices and incomes in Texas real estate markets. The cause/affect relationship is most prominent in Metropolitan areas.

. Dr. Anari actually concluded that Texas homebuyers tend to trade up as their income rises, especially from the lower home price ranges. But he discovered that as incomes keep rising, people do not necessarily opt for larger homes. He charted the data correlating 2009 Home Price Distribution in Texas, Austin, Dallas and Houston as well as the 2009 Family Income Distribution in Texas, Austin, Dallas and Houston. Then he applied Pearson’s correlation coefficient, a simple statistical measure of the strength and direction of the relationship between two variables.

The correlation coefficient of 0.53 reflected the relationship between home prices and incomes in Austin Texas. The coefficient rose to 0.98 with income brackets over $50,000 and home prices over $100,000. Other market segments right inside. There was a high correlation in another bracket of homes valued between $100,000 and $400,000 and family incomes of over $50,000 less than $200,000. The correlation went down in a third bracket that included homes valued at over $400,000 and annual family incomes above $200,000.

At the end of the report, the author concludes that given the small changes in Texas family incomes over time, it is unlikely that Texas can expect a major drop in home prices.

Prices for Texas Hill Country homes and second-homes somewhat mirror what is going on in Austin and San Antonio and other Metropolitan areas as buyers seek seasonal homes with recreational opportunities and a getaway from city life on Hill Country ranches.

To find out about Texas Hill Country homes for sale, please call Dale E. Cook, MBA and owner of SAGE – Premium Texas Real Estate in Fredericksburg at (830) 992-0056.

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