Of the 13 urban core districts listed below, 8 showing gains this school year were losing students five years ago –
All 13 districts shown are experiencing higher growth (or, in the case of San Antonio I.S.D., less decline) than five years ago –
So what happened? Why are these urban districts gaining students after periods of loss?
This year’s growth in the districts below is primarily due to younger families having to rent rather than buy. And, rental properties (both homes and apartments), tend to be in the urban core. Rentals are in high demand — with apartments reaching historically high occupancy levels in most urban areas — due to un- and under-employment, and also due to the lack of readily available mortgages. The on-going economic downturn is having this delayed demographic consequence.
How long will this contra-flow pattern continue for the school-aged students? The simple, but not-very-time-predictive answer is: “Until the housing market turns around.” To explain this further: a turnaround will occur (1) when unemployment rates become significantly lower and (2) when the foreclosures are over. Now most home loans require 20% down via private lenders (exceptions exist, like VA loans). But, at the end of 2010, 46% of all current mortgagors had less than 20% equity in their homes, pointing to the potential for more future failures. And, home mortgage underwriting standards continue to rise.
Based on a complex formula of new households being created, housing units being demolished or used for other purposes, and the estimated number of inventory now available, it will take until perhaps 2016 for the housing inventory to be a normal working inventory. And, home prices could fall more in the meantime. (Refer to Gary Shilling’s INSIGHT and John Mauldin’s “Outside the Box” – both May, 2011 publications.)
Homeownership has fallen below its original level prior to the subprime mortgage availability of 2001-2007. As ownership slides, and there is continued increase in Texas population, then metro inner areas will see more renters. Some argue that homeownership has never been a better bargain. But, incomes were growing in the early 2000s and now household incomes are weak.
During the first quarter of 2011, the nation’s home ownership was about 66.4% — and in 2016, it will likely be 64%. Even a one percent decline propels significantly more rentals. Ultimately, this means that districts such as those seen below, will continue to show strong rental trends. If Texas increases in population at, conservatively, 1% per year, and if Texas loses just 1% of its homeowners over five years (who are forced to become renters), then thedemand for added rental units (both apartments and single-family) will be about 418,750 by 2016*.
* In 2009, there were 9,724,220 housing units in Texas, with approximately 25.2 percent (2,479,676) as rentals. Over the 2011-2016 time frame –based on added population alone — there should be an added demand for 1,250,000 new housing units in Texas, of which 318,750 should be additional rental units. Likewise, if there is even a 1% further slide over the next five years of current owners moving to rental units, then there will be another 100,000 needed rental units, for a sum of 418,750 new rental units required by 2016. [According to the American Community Survey data, homeownership in Texas was 66% in 2009, and was declining at a lower rate than the U.S. as a whole – since the State's ownership had declined less than one percent between its peak and 2009.]