Texas is Different

Why is the Texas economy generally in a better position to support continual growth in real estate value than other regions of the U.S.?

Data from the Real Estate Center at Texas A&M University and other sources support the belief that the Texas residential real estate market is affected differently than other U.S. regions by the subprime mortgage crisis.

The buoyancy and diversity of the Texas economy softens the potential for the hard fall that many other real estate markets have experienced. Texas has had a more gradual real estate price expansion versus the steep escalation in California, Nevada, Florida and other states.

Mark Dotzour, chief economist with the Real Estate Center at Texas A&M University, commented at a recent Houston Economic Forum gathering that credit markets are in "considerable disarray" with the value of questionable mortgages still declining. He also noted that the U.S. economy, with weaknesses largely centered around the auto industry, is being outperformed by the Texas economy.

"Despite the national slowdown, Texas is still strong," said James Gaines, research economist with the Real Estate Center at Texas A&M, in a press release in June. "There's no reason prices shouldn't continue to rise despite the increase in foreclosures and the slowdown in transactions, construction and new home starts." At that time, California and New York reported home price appreciation at 3 percent, while Nevada price increases virtually disappeared at just 0.6 percent. Florida home price appreciation held steady at the 4.3 percent national average, while home prices increased 6.9 percent in Texas.

Continued population migration to Texas from other states is driving up land values at a double-digit rate. Population density tends to be higher in these regions, and people relocating to Texas are accustomed to smaller living spaces. Texas builders are now producing upscale "vertical" residences in cities and the suburbs to match buyers' preferences for zero lot line homes, patio homes or townhomes that deliver low maintenance and "lock and leave" convenience.

Nancy Suarez, a broker with Prudential Gary Greene Realtors, reports active Houston home sales in the $200,000 to $500,000 range. She explains that buyers of these homes are well-qualified, tend to be business executives or professionals, have an immediate need for a private residence and are ready to close a deal. She also attributed this positive trend to the strong, diversified Houston economy.