Last Updated on October 2, 2022, 1:44 AM | Published: October 2, 2022
OKLAHOMA CITY (Free Press) — Young, prospective homebuyers looking for the perfect “starter home” in Oklahoma City are facing stiff, possibly unbeatable competition, and are fighting a battle on the open market against
- a ballooning investment Goliath,
- long-stagnated incomes,
- and even the city’s own development aspirations.
But, there’s a disconnect between the grinding process for actual homebuyers and glowing accounts given in national media about Oklahoma City’s value for homebuyers.
Just last year, Lending Tree labeled OKC as the 2nd “friendliest” city for first-time homeowners out of America’s 50 largest metropolitan areas, and it’s easy to see why. Out of all 50 listed cities, OKC had, by a solid margin, the lowest average down payment prices in the nation.
So why are first-time homebuyers across the city reporting so many hurdles and hardships in the quest to secure their first house?
If prices are so cheap, and the market so friendly, why are we seeing a pattern of residents being trapped in a cycle of renting, pushing off efforts to enter homeownership for, in many cases, more than a decade longer than their parents did?
A key problem is the functional elimination of the traditional starter home from the Oklahoma City market.
Prime for the Taking
The kind of house historically considered a “starter home,” a small, no-frills, two-to-three bedroom house near the bottom of the local mortgage range, is also prime real estate for any rental investment.
As word has spread nationwide of Oklahoma’s remarkably low housing costs and cheap market, out-of-state investment has begun flooding in to buy up exactly that kind of low-cost housing, often to be used as rental property.
“I started looking into this about two years ago when I noticed that my house was the only one on my block owned by an actual homeowner,” State District 93 Representative Mickey Dollens told a group assembled for an interim study on housing at the Capital earlier this month. “Last week alone, I got three offers from corporate landlords on the east and west coasts to flat-out buy my house cash.”
It’s that ability for corporate-backed investors and landlords to cover the full price of a cheap house with cash that makes them an ideal buyer for any seller, but knowing that there will be a guaranteed and sustained return on that investment often also allows them to offer more than current market value.
A quick look at almost any real estate listing in the category shows that sellers are betting on this.
A listing on Zillow for a 1000 square foot, three-bedroom home on Northeast 31st Street shows that the property sold for just $10,000 in 2015. After some extensive cosmetic renovations, it was recently put back on the market for $120,000 in August of this year, a seven-year price increase of 1,100%. When the property didn’t sell after just one month, the price was lowered to $114,900.
The listing itself, posted by Edmond’s Spearhead Realty Group, LLC, is aimed directly at investment companies looking for easy short-term rentals, even drawing a clear parallel between the houses those investors are snatching up and the houses for which first-time buyers are looking:
“This home is in the perfect price range for both new owners as well as investors to keep this as an Airbnb or short-term rental.”
This property, currently priced just shy of $115,000, does not feature central heat and air or a paved driveway.
Immovable Income
Conventional wisdom – and a majority of mortgage lenders – suggests that you not purchase a home for a price more than three times your income.
According to Data USA, OKC’s median household income is roughly $56,000 per year, meaning that an earner in the middle of the city’s income bracket could conceivably afford a house in the $160,000 range. There are plenty of listings in that price range, though many are small, one-to-two bedroom houses often much less than 1000 square feet, not quite the traditional definition of an equity-building starter home.
Many are being pushed as “package deals,” bundled with other properties primed for corporate investment, or are recently updated rentals openly designed to be Airbnbs.
For a full-time worker making only the state minimum wage of $7.50 per hour, a yearly income that would theoretically qualify for a mortgage of $50,000, there is currently nothing at all listed for sale.
Increasing the search to properties up to $75,000, a reachable goal for a worker at $12 per hour, results show only three clear listings within Oklahoma City: two near-dilapidated, boarded-up properties, and one being sold explicitly as a rental investment that currently has a tenant living inside.
Oklahoma’s minimum wage has not changed in 12 years. A state Senate bill aimed at increasing the minimum wage to $15 per hour was introduced and quickly died earlier this year.
A Lot for a Lot
Regulations targeted at increasing safety, environmental consciousness, and quality control have all contributed to the rising costs of home building materials nationwide, but in most cases across Oklahoma City, the bulk of a home’s cost still comes from the lot on which it sits.
With so few starter-style houses readily available for purchase, one alternative is to buy a lot zoned for residential and design and build your own starter home from the ground up, paying for only the amount of house you need.
Within Oklahoma City, however, lots can still be priced far outside of viability for many residents.
Zillow again shows a lot for sale on Northwest 2nd Street coming in right at 7,000 square feet, the perceived perfect lot size for a simple starter home.
In September of 2019, the lot sold for $47,000. It’s back on the market now for $98,500, including a “dilapidated” house that currently has a paying renter living inside. The listing, written by Moore-based Chamberlain Realty, LLC, encourages the buyer to tear the house down and redevelop the lot.
So what happened between 2019 and 2022 that could more than double the price of this lot?
Film Row.
The lot is just a couple blocks removed from the newly developed, increasingly high-end district, funneling residential real estate interest directly into the area.
In 2020, the County Assessor reappraised the property and taxes were increased by more than 70%, priming the mostly empty area for incoming, high-end residential development.
There are currently only around 20 available empty lots in the OKC Metro for $50,000 or less, with almost all of them in Capitol Hill or the Northeast side of the city, both areas that have yet to see major high-end development.
Homes sell, but who’s buying?
Much has been made about the overall dwindling stock and supply of available housing in Oklahoma and its correlation to the rising unhoused population here in the city, but even as houses are being bought up at lightning speeds, far fewer low-income buyers are even making an attempt.
According to Holley Mangham, Communications Manager for the Oklahoma Housing Finance Authority, the body that reviews and approves applications for housing finance assistance, with only three months remaining in 2022, the year has so far seen only half the number of residents approved for assistance compared to the entirety of 2021.
The numbers would suggest that far fewer low-income residents are even attempting to buy.
Likewise, the OKC Metropolitan Association of Realtors (MLSOK) shows that completed sales of all property types has been down more than 7% for months.
As for how many first-time homebuyers have successfully secured a house in the past year, MLSOK said that they don’t keep track of that data.
Brett Fieldcamp has been covering arts, entertainment, news, housing, and culture in Oklahoma for nearly 15 years, writing for several local and state publications. He’s also a musician and songwriter and holds a certification as Specialist of Spirits from The Society of Wine Educators.
