The land of mustangs and mavericks is still bucking the national trend when it comes to real estate. You may have heard the news this week that new and existing home sales are down on a national level for the 6th month in a row. In fact, national analysts foresee an 11 percent drop in housing starts this year and next. Yet as far housing is concerned, Texas is still flying high. The reason is a growing--and seemingly insulated--economy.
According to Mark Dotzour, chief economist at Texas A&M University's Real Estate Center, Texas is likely to escape less favorable economic trends in other parts of the country. "The good news is that even though the United States could have a recession, it's highly possible that Texas won't participate in it," he says. "The Texas economy is not overheated in the housing market, and we don't have a lot of ailing auto plants in our state."
In other words, Texas' housing market has been driven by good economic fundamentals--affordability, new residents and economic growth. Employment rose 3.1% last year in Texas. Dallas in particular almost doubled its rate of job growth. So, people and jobs are coming to Texas, and they have to live someplace! On the other hand, even though demand has been strong, Texas hasn't participated in the housing-price boom. Our Median home price had only risen 14 percent from 2001. As prices at the national level rose at much higher levels, Texas' relative affordability increased. The key reason Texas didn't experience the huge price gains of California, Florida and other states is plenty of land and a low population density. It's a big state! Texas markets present a marked contrast to the Pacific Coast, for example, where tight supplies of vacant land and tougher zoning make building difficult. In Texas, the ready availability of land and low entry costs attract homebuilders, creating a competitive marketplace that helps keep a lid on price increases.
As a result, the so-called "housing bubble" in other areas of the country doesn't extend to Texas. The risk of a sudden collapse of the Texas housing market is low, since housing prices never inflated that much in the first place. And the news is even better for the Metroplex. The median new home price in the Dallas-Fort Worth area is about $180,000, compared with $230,000 nationwide according to David Brown with the housing analyst Metrostudy Inc. "That's in large part why we haven't seen some of the pullback in housing activity," Mr. Brown said. "Housing is very affordable and should shield us from any significant downturn."
Dallas and Ft. Worth remain among the most affordable metro areas. More than 60% of residents can afford to purchase a home. Compare that to New York and Los Angeles where that figure is less than 10%.
Sources:
- Real Estate Center @ Texas A&M University
- Federal Reserve Bank of Dallas
- Metrostudy, INC
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