Potentially Dangerous 'Imbalance' Seen in Rising Texas Housing Prices

The price of a home in Texas has gone up 43% in the past ten years, that is seven times the average increase in home prices nationwide, and researchers at Texas A&M's real estate center say they are beginning to see potentially dangerous 'imbalances' in the housing market, News Radio 1200 WOAI reports.

Economist Dr. Luis Torres tells News Radio 1200 WOAI the biggest imbalance is in the disappearence of homes priced at less than $200,000, which now make up a significantly smaller portion of the market, when adjusted for inflation, than ever before.

“Supply hasn’t kept up with demand,” Torres said. “In April, the months of inventory for Texas homes inched upward, but sluggish residential housing construction could impede progress. If the housing shortage continues, expect prices to go higher as more Texans find housing unaffordable.”

Torres said the first impact this imbalance will have on the state's economy is in destroying Texas' image as a 'low cost' state.  It is that image which, more than highly touted 'business friendly' policies by politicians, has fueld the 'Texas Miracle,' with the state continuing to attract new residents and create new jobs, even during the Great Recession and during the recent oil price crash.

"That has been one of our major competitive advantages to the rest of the nation," he said.  "But now, we see prices rising at a higher rate than income."

He says this leads to the 'Californiaization' of the state's housing market, where housing becomes less affordable, discouraging business movement and making it all but impossible for younger people to buy a home.

Torres calls it 'housing affordability stress,' and he says it is widespread, due to a combination of lagging wages and house price appreciation.He points out that, despite the 'Texas Miracle,' wages in Texas remain lower than the rest of the country, making the skyrocketing price of housing in the state an increasingly fragile situation.

"The signals are there that the market is diverging from the fundamentals," he said.  "That right now is being driven by the strong demand."He says numerous factors are responsbile for this increasing 'imbalance' in the Texas housing market.New workers continue to flock to the state because jobs continue to be available.  That is combined with several factors which have conspired to erode the low end housing market which was exemplified by the 'Ray Ellison Homes' developments in the 1980s and 1990s, which provided quality, low priced 'starter homes' which allowed young Baby Boomers and Generation Xers the ability to buy a home, and the 'status' and long term financial benefits home ownership implies.

They include new mortgage requirements which followed the housing crash of 2008, increasing prices of supplies and labor, which will be exacerbated by the tough immigration measures being implemented by the Trump Administration, and a slew of increased local and federal regulations which drive up the price of housing.

Torres says one thing local governments could do to help low income home buyers is to lift 'tree ordinances,' 'impact fees' and other regulations which local politicians tout are placed against 'wealthy big developers' but, in reality, are passed along to homebuyers, making homes increasingly unaffordable.

So, is this 43% a housing 'bubble,' and is Texas, which was not affected by the housing crash of 2008, which decimated 'sand states' like Arizona and Florida, in for a housing crash of our own?

Torres says there is one thing we need to watch for, which is always a predictor of a housing crash, and that is flippers.

"If we start seeing that movement from 'I want to purchase a house because I want to life in that house' to 'I want to purchase a house as an investment and sell it right away'."

He says so far, most homes are being purchased by occupants, which is a good sign...at least for now.

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