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Sweetwater Housing Study 2017

Sweetwater Housing Study 2017

EXECUTIVE SUMMARY

CDS Community Development Strategies (CDS) was hired by the Sweetwater Enterprise for Economic Development Inc. (SEED) to complete a housing study to determine the viability of the existing and the potential for new single family and multi-family market rate housing in the City of Sweetwater, Texas.

·       Sweetwater population has fluctuated slightly from around 11,467 in 1990 to 10,888 in 2017.

·       Population, household and job growth has been flat for several decades apart from energy related employment spikes associated with increase of oil and gas prices in addition to the emergence and

popularity of wind power in the Sweetwater area.

·       There has been no new market rate multi-family development in Sweetwater since the late 1980’s and

only 10 single-family homes have been constructed in Sweetwater since 2007. Sweetwater faces issues of neighborhoods with a significant quantity of tax delinquent, blighted and outdated homes with more than 90% of housing units in Sweetwater built before 1990.

·       CDS provided a housing survey to employees in Sweetwater which was very well received and gathered 950 responses providing very important feedback. Survey results revealed the majority surveyed said finding desired housing to meet their budget and needs in the area was difficult or impossible. The survey also showed that currently low monthly housing costs has led respondents to have unrealistic home buying cost expectations, believing they can pay the same low current rate in their next home. Finally, the survey revealed that respondents in general feel the town is moderately preferable. In other words, Sweetwater itself, based on survey respondents does not drive folks away.

·       Although population, household and job growth are relatively flat over the past decades, wages have increased since 2010 and wages in Sweetwater are good relative to other comparable rural Texas cities.

·       Sweetwater has well-performing public schools under new leadership with goals to more actively market district accomplishments and improve achievement.

·       The city has a strong sense of place and community and is full of community based assets that are fundamental to achieving successful revitalization and reactivation of commercial and historic properties, especially the historic downtown square.

·       CDS has identified limited opportunities for new housing development in Sweetwater and recommends developing strategies to increase supply of one to three bedroom (but mostly two bedroom) infill rental townhomes and duplexes at a small quantity in price ranges from $900 to $1,500 a month.

·       CDS also recommends increased supply of rehabbed single-family home rentals by appropriately applying build and life safety codes along with rehab incentives to private facilitating revitalization of target neighborhoods.

·       Infill lots should also be the primary focus for the incremental quantities of single family for-sale homes that are needed in Sweetwater.

·       The Sweetwater Enterprise Economic Development (SEED) working with the City of Sweetwater can address absentee owned, tax delinquent and blighted properties for rehabilitation and infill in an efficient manner that capitalizes on existing city infrastructure and services.

Demographic and Economic Analysis

According to the Census Sweetwater's population decreased by 561 and households decreased by 187 from 2000 to 2010. This trend adjusted upward slightly from 2010 to 2017 as the city's population and households shrank by only 18 residents and 48 households, respectively.

Projections from 2017 to 2022 indicate improvement of growth trends projecting population to increase by 186 and adding 80 households. According to reports from local employers during this study, Sweetwater will have job growth in 2017 of about 70 net new jobs. Qualitative and quantitative research for this study concludes that future population, household and job growth in the Sweetwater area will be flat except for significant expansion of existing businesses or the relocation of new jobs to the area, both of which were not revealed to be planned to occur in the foreseeable future.

Housing Market Trends – Single Family For-Sale Homes

New homes in Sweetwater have not been developed at a significant scale in the past four to five decades. For instance, only 10 new homes have been built in Sweetwater since 2007 and no new subdivisions built in Nolan County in the past 40 years.

There is a large volume of tax delinquent and absentee owner properties. The cost of making these homes inhabitable are significant causing properties to remain blighted. In relation to other rural Texas cities of its size Sweetwater has a relatively stable and sustainable base of employment and good wages. Therefore, many have the income required to purchase or rent housing yet sufficient supply of new housing has not existed for quite some time.

The increasing land, labor and materials costs for housing has pushed housing costs range for the most recently constructed 2,540 square foot single-family home in Sweetwater to $390,000. This would put construction costs according to this individual top of the market project at 153$ per square foot. The newest conventional suburban- style housing development in the area is currently underway at Young Farm Estates located in Roscoe, 8 miles west of Sweetwater. It currently has 70 total lots with three homes constructed. They list a 1,400-square foot floor plan for $160,000 along with a 1,641-square foot home listed at $189,500, putting cost per square foot for a new single-family home in Roscoe at $115 per square foot.

Sweetwater's relative rural location and lack of large scale residential development required for builders to afford an economy of scale makes it costly for outside builders to build affordably in Sweetwater. Although there are many neighborhoods inside the city limits most of existing housing stock requires significant renovation costs which many locals state regularly eclipses the listed value of the home.

Currently Abilene, located 40 miles east of Sweetwater, is experiencing residential construction growth that causes potential Sweetwater buyers to elect to purchase a newly built home in a highly regarded school district (specifically southwestern Abilene in Wylie ISD) with newly constructed homes starting at $179,000 and up. In order to qualify for a new house around $200,000, a household will have to earn in the range of $75,000 a year and be prepared to pay total housing costs of about $1,795 a month.

CDS believes that the salaries of new employees (50 - 60 annually) and the pent-up demand for new housing could overcome these monthly housing costs. Surveys and interviews of local employers and employees conducted by CDS in addition to the U.S. Census Bureau’s Longitudinal Employer-Household Dynamics (LEHD) data reveal that up to half of the workers employed in Sweetwater commute to and from Sweetwater for work.

Although commuting workers have already decided not to live in Sweetwater, based on discussions with employers there is a strong desire, especially from management and executives to change the culture of the highest wage earners and highest profile industry professionals to reverse the current culture of locating outside of the Sweetwater area. Based on survey results only one third of respondents found suitable housing meaning there is outsized difficulty in finding desired housing in the Sweetwater area. However, current owners and renters in the Sweetwater area have unusually low monthly housing costs. Survey respondents indicated the expectation for the same very low payments in their next home which is not reasonably realistic for home buyers and therefore must be taken into account when considering the intricacies of housing supply moving forward.

Housing Market Trends – Multi-family Rentals

The multi-family apartment rental market has suffered from mismanagement and a lack of new supply for nearly the past two decades besides a recent income restricted complex, Mustang Heights. Therefore, existing stock consists mostly of outdated floorplans, finishes and lack of modern on property amenities such as fitness centers and pools. The most recent multi-family construction in Sweetwater was Mustang Heights an 80-unit, income restricted multi-family complex completed in 2013.

There has not been new market rate apartment complex built since the late 1980s. Market rate rents across seven existing complexes containing a total of 373 units range from as low as $425 for a studio unit to $629 a month for a two-bedroom, one and a half bath unit. Although Mustang Heights does offer three-bedroom units there are no other existing market rate complexes in Sweetwater that offer anything larger than two-bedroom units.

Talks with local real estate investors believe two and three-bedroom market rate apartments at $750-$800 per month are least served by the market. Renters seeking two, three and four bedrooms are forced to rent single family homes. However, discussions with realtors and real estate professionals revealed the supply of available four-bedroom homes for sale or rent in Sweetwater is rare.

Housing Market Trends – Single Family Rentals

Single family rentals are a profitable investment for owners and local buyers. Rentals range in size from small duplexes with studio sized rooms to 3,500 square foot homes. Mostly the under $100,000 houses are purchased and rented out. The condition of these houses tends to be mostly sub-standard and aging without central air and heat, there are a handful of rentals with recent renovations and upgrades which command the highest rents. Pricing varies from a low of about $450 per month to $1,300.

Most rent housing has a ceiling of about $1,500 and can rent for $0.95 per square foot monthly. Discussions with investors and owners of rental housing expressed that it is common to receive calls twice a week on average from prospective renters and that many prospective tenants and landlords rely on Facebook and other social media to advertise and search for rental housing.

Discussion Group Summaries

As part of this study, SEED arranged four different discussion groups to assist CDS in gathering information and feedback from the community. These groups included local employers, home builders and developers, realtors, bankers, school district and city staff. The information gathered from these discussions corroborated the findings and recommendations of this study. They also highlighted their unique challenges and possible solutions related to the local housing shortage.

Whether it be housing, community or quality of life issues respondents revealed a strong preference or at the very least and indifference for living in Sweetwater, which means there is some room for improvement in those areas which could affect positive change in regard to improving the appeal for those who are on the fence about relocating to or from Sweetwater.

Sweetwater Area Housing Survey

In order to get the housing perspective of typical employees, a survey of Sweetwater employers was conducted reaching 950 respondents. The responses to this survey provide helpful insight into the needs and preferences of area residents.

Questions asked residents about their most recent home renting or buying experience. According to the results, it is constantly getting harder to find housing that meets the needs and budgets of local households. Open ended questions concerning rental and purchase housing generated frustrated comments about how difficult it was to locate housing that met some or all of their needs. Many have had to settle for what was available.

Another prevalent theme from the survey and our analysis in this report is the low prices that residents expect to pay for new housing. Many survey respondents expect a monthly payment for under $1,000 per month. We expect part of this price disconnect could be educational and can be mitigated by marketing and promotion. On the other hand, many residents (according to survey results) have lived in their home for 10 or more years and separate survey responses indicated some have no house payment at all. Again, some may be unaware of the total current costs and market dynamics dictating higher monthly payments than anticipated or desired. Unless buyers want to purchase an old and obsolescent house (which in Sweetwater still normally requires a significant amount of cost in updating) they will have to pay the market price, which in the area currently ranges from listed prices of $160,000 to $189,000.

Housing Demand Analysis

CDS has estimated that the housing market in the Sweetwater area could readily absorb 5 to 10 additional new units annually over the next five years. Demand for this new housing is expected to come from two sources, job growth resulting from natural turnover rates and local existing business expansion and latent demand.

Based on in person discussions and phone interviews with top employers in the area regarding current and future expected employment growth, there will be 70 new jobs created in 2017.

CDS was unable to come to a conclusive finding through qualitative or quantitative research for net new job growth from 2018 through 2022. CDS interviewed the largest employers in the area during this study and therefore future job estimates may be considered conservative since it is reasonable for smaller existing companies to expand or for companies to relocate and bring new jobs to the area.

Though, Sweetwater will have new workers during that span due to natural employee turnover, just not predictable net new job growth. Some of this turnover will occur in top paying positions which may make up a slight but not significant demand for either a new custom built home or a recently updated existing home. It is certainly reasonable for new job growth to take place in the Sweetwater area given the strong base of existing businesses which are the number one source of new job creation in any community. Additionally, future opportunities such as the BNSF intermodal facility coupled with future prospects of expansion in the distribution and logistics industry sector plus other new economic opportunities could be a growing source of new jobs for the area in coming years.

It is certainly reasonable for new job growth to take place in the Sweetwater area given the strong base of existing businesses which are the number one source of new job creation in any community.

With an improving national economy, existing natural and logistical resources to capitalize on, the Sweetwater area is poised to do well, especially considering its role as a regional hub of commerce and employment for Nolan County.

Conclusions and Recommendations

In the final section of this study, CDS reviews the findings and makes several recommendations which are aimed at addressing suggestions appropriate for the conditions in Sweetwater housing market.

These recommendations discuss increased supply of rehabbed single-family home rentals and creating programs and/or incentivizing infill rental townhomes and duplexes home building along with facilitating better communication and promotion so that the market can be driven by timely and accurate information rather than outdated perceptions.

The Sweetwater Enterprise Economic Development (SEED) working with the City of Sweetwater can address absentee owned, tax delinquent and blighted properties for rehabilitation and infill in an efficient manner that capitalizes on existing city infrastructure and services.

 

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