A favorite information source, Texas A & M's Real Estate Center , has some intriguing information that, read as a whole, suggests that Texas has been depressed long enough that it just might be the next state to host the housing boom.
The Center gathers information for reports and data for its newsletter, available by subscription. According to fourth-quarter news, Texas house prices were "increasing faster than inflation but at a rate substantially slower than the national rate." According to the Center, Texas home prices increased 6.3 percent from third quarter 2004 through third quarter 2005, approximately 2 percentage points greater than the state's long-term annual rate of increase.
The good news? Texas isn't in a housing bubble. The bad news? Texas isn't in a housing bubble.
This is according to an index of Texas home prices developed by the Center (dividing the time series of the annual average price of homes sold in Texas by the average price of homes sold in the base year 1979 and multiplying by 100).
In other words $100 invested in a home in 1979 was worth $175.80 in 1985, giving an index of 175.8. By 2005, that $100 investment was worth $327.20.
When housing is compared to consumer price indexes, that can change. For example, in 1991, when the consumer price index was 170.4 for the state, Texas housing had slipped to 168.8, which means that homeowners lost about six years of gains.
In Dallas, for example, the home price index remained below the city's consumer price index between 1990 to 1997. From 1997 to 2005, the area's home price index rose from 212.1 to 209.2.
Overall, Dallas and Houston have averaged 4.4 and 4.2 percent home price appreciation since 1979, below the national average of 4.5 percent. The state as a whole has averaged 1.3 percent above an annual inflation rate of 3.4 percent since 1979.
Because consumer price indexes include housing costs, the Center also compares the numbers minus shelter costs, making the past look grimmer. In that scenario, Texas has only beaten inflation by 1.1 percent above non-housing goods and services.
For bubble worriers, that means that Texas housing gains for the last eight years has only recovered ground lost in the 1980s.
So is Texas bubblicious?
According to the Center, unemployment rates fell from 6 percent in October 2004 to 5.2 percent in October 2005.
Sixty-nine thousand jobs have been added since 2001's tech-wreck and 9/11 events. Although growth is expected to be better than 2004, it will still be slower than the national rate.
Like other areas, Texas has benefited from low interest rates and aggressive home loan financing, because home sales and prices increased despite negative job growth and low personal income increases in 2002 and 2003. But appreciation hasn't been that good. During the first half of 2005, Texas came in dead last for home price appreciation according to the Office of Federal Housing Enterprise Oversight . And let's keep in mind that Texas' 4.7 housing price increase in 2005 was less than half of the nation's appreciation of over 12 percent.
Overall, the Center concludes that Texas has nothing to worry about where a housing bubble is concerned - employment gains, personal income gains and population growth have paralleled housing gains.
The Center concludes that there's "no reason to anticipate a housing shortage that would drive prices up, or an oversupply that would depress the market."
Price increases, sales and construction levels will be equal to or slightly lower than 2005, driven largely by mortgage market conditions. If mortgage rates go up, housing sales will slow down.
However, others see Texas ripe for the pickin'.
TheStreet.com says that "the Lone Star State is currently the brightest spot in the country's housing market. Whereas many of the bread-and-butter, easy-money areas of California, Florida, Washington D.C., and Arizona are slowing, housing sales are spiking in the four major Texas cities of Dallas, Houston, San Antonio, and Austin."
"The Texas housing market is expected by many to remain strong, given the rising energy prices which are fueling economic growth in the state. Housing speculators, after being run out of Florida, California and Arizona, are already turning up in areas like Austin to flip properties for a quick buck," writes thestreet. "But speculators might be in for a big surprise, since Texas is far from land-constrained and artificial demand is not likely to have as big of an effect on housing prices in the state. Homebuilder investors should remember that Texas is not a savior for the sector. The state's housing prices are far lower than California, Florida and Arizona. For example, at Ryland, the average selling price for home closings in Texas was $184,000, compared with $378,000 in California and other Western regions."
According to the 38th Annual Allied Van Lines Magnet States Report, which tracks migration rates, Texas was America's most "magnetic" state in terms of attracting new residents. Texas experienced the largest net relocation gain (inbound moves performed by Allied Van Lines minus outbound moves) in the country, with 8,600 inbound shipments compared to approximately 6,600 outbound shipments for a net relocation gain of nearly 2,000.
Texas has posted about a 385,000 person gain in population since April 2000, or more than 1.6 million by 2005.
Conservative estimates, says the Center, are that Texas will increase in population by 12.5 million between 2004 and 2040.
