Mark Dotzour on the Texas Real Estate Market
Dr. Mark Dotzour, the Real Estate Center’s chief economist, discussed the Texas housing market on Tuesday’s edition of NewsHour with Jim Lehrer. The 12-minute segment is available online.
I’ve posted the transcript of Dotzour’s remarks below, but the video on the MacNeil Lehrer news hour website is worth the 12 minutes watching time to get a feel of the overall U.S. market and how well Texas is doing compared to the other regions discussed (New England, California, Michigan).
RAY SUAREZ: Mark Dotzour, how does Texas resemble what you just heard from Massachusetts and California? And how does it resemble the nationwide trends?
MARK DOTZOUR, Texas A&M University: Hello, Ray. It’s good to visit with you. We down here in Texas we have a real, unique situation going on right now. We’ve got a combination of very strong job growth. It’s basically double the national average. We’ve got home price appreciation that’s going up at an increasing rate in many of our metropolitan areas.
And at the same time, we’ve got population growth. I noticed just last year we had 570,000 new people come into the state of Texas. And at the same time, the home builders have cut back on production, as well, like you’ve previously heard. And so we’re in kind of an interesting position, where home builders are cutting back on their building, but inventory levels of homes for sale are quite low. And that’s why we’re seeing the good rates of price appreciation in many parts of Texas.
… then later in the segment…
RAY SUAREZ: Mark Dotzour, why don’t you jump in there? Because you described a similar situation with a kind of artificial scarcity. Why aren’t the people who are building houses build more for a marketplace where there are 575,000 new people to house?
MARK DOTZOUR: Over the last 10 or 15 years, a lot of national volume home builders have pretty much captured a large market share in many of Texas’ cities, as well as many cities around the country. A lot of those volume builders are publicly traded firms. Their earnings are down, and their shareholders are demanding that they cut their volume back, walk away from land that they’ve purchased to try to regain more profitability.
That’s probably a good idea in many parts of the country where the economy is slowing down. There’s too many houses maybe a little negative job growth. But in areas where you’ve got robust population growth and job growth, it doesn’t make a whole lot of sense.
It’s good for Texas homeowners right now. We’ve got places like Midland, Texas, where houses are up 21 percent from a year ago. Austin and San Antonio are both up almost 11 percent. So we’ve got a real unique situation here.
And if you don’t mind, I’d like to kind of take issue with that idea that the real estate market is America in a grim market, because when you really look at it, the Office of Federal Housing Enterprise Oversight, OFHEO, recent numbers show that home price appreciation in America is still 4.25 percent. And, nationally, over the last 27 years or so, that’s averaged about 5.25 percent.
So I don’t really see it as grim. The fact is, home builders are cutting back. That’s good for America, because we don’t want to have a large oversupply of homes. And it may be grim for home builders in the short term, but that’s good for America in the long term.