Texas A&M Economist Mark Dotzour on the Economy

Mark Dotzour is one of my favorite speakers. He makes things easy to understand and is funny. Below is a snippet from one of his recent speeches.

COLLEGE STATION (Real Estate Center) – Speaking before the Houston Economic Club earlier today, Dr. Mark Dotzour discussed the state of the national and Texas economies, and made a few predictions.

Credit markets are still in “considerable disarray,” with the value of questionable mortgages still declining, said Dotzour, chief economist for the Real Estate Center at Texas A&M University.

More bad news regarding poorly performing mortgages is on the way from the banking system. Dotzour said the news may be disclosed by Feb. 15, when auditors ratify year-end financial statements.

“The international credit turmoil has led global investors to run to the political safety of U.S. Treasury securities, driving down the yield of ten-year treasuries and residential mortgages that are priced on the ten-year,” he said.

Dotzour predicts substantial layoffs on Wall Street in the coming weeks.

The underlying national economy is strong and resilient, he says, but it has weaknesses that could cause severe damage.

“The U.S. economy is like a professional wrestler with blood clots in his circulatory system,” Dotzour said. “The body is strong, fit and competitive, but nobody knows how many clots are in the system or where they could land. All we know is that when they do land, the damage will be significant.”

The U.S. economy, with its weaknesses largely centered around the auto industry and construction, is being outperformed by the Texas economy.

“Our construction industry is still pretty strong by comparison, and we don’t have much exposure to the car business,” Dotzour said.

7 thoughts on “Texas A&M Economist Mark Dotzour on the Economy”

  1. Hi Steve-

    I’ve been periodically checking back to see if you have the Austin Real Estate numbers for October? I know with Thanks Giving being early this year, it’s kinda getting a jump start on the holiday season. Do you think you’ll get one out for October or do October/November together?

    Thanks-love your blog!

  2. Why is it that Texas is still getting the “stand alone” treatment in macro forecasts? You would swear it was surrounded
    by a hermetically sealed package economically speaking. From what I understand, Texas businesses are borrowing
    at the same rates, using the same US dollar, and, last I heard, relying on the solvency of the rest of the US to sell their corporate products. Sorry, but the Texas economy is as reliant on the US macro issues as the rest of the country.
    When the US gets a collective economic cold, Texas will sneeze with the rest of the US. IF they haven’t yet, they
    will very soon. The only way they could avoid the national recession that has just kicked in is if they had their
    own state monetary system and reserve, and sold all products and services in state. Until and unless they succeed
    from the union, they will get hit hard next year like the rest of the USA…..and to paraphrase Bill Murray in Stripes,
    …”And that’s a fact, jack!”

  3. I agree with scott. The large down payments coming from people that are selling appreciated homes in the rest of the country are not nearly as frequent. People are actually having to SAVE money to buy a home now as opposed to “earning” enough money from the appreciation of their current home to buy a more expensive home. Fannie Mae and Freddie Mac don’t seem to be immune from home depreciation (the trigger for subprime defaults) either. Even they might have to slow lending to qualified applicants as they are running short on capital. I live in Travis Country which has experienced California like appreciation in the last few years, and now I haven’t seen a house sell in my section in five months. I think prices peaked here in June and there has been a bit of speculation, but these sellers are still trying to get top dollar so the homes just sit. In the end I think Austin will handle this better than most places in the US. 2005 home prices will be 2008 home prices, we will just loose the equivalent of two years appreciation. (Not nearly as bad as the eighties). We closed a tech company with offices in Vegas and Phoenix and no one has been able to sell their homes when we reopened the company here. Now, 10 people are renting in Austin instead of buying where as a year ago the would be buying.

  4. > 2005 home prices will be 2008 home prices
    Let’s hope not, because 2005 prices were 2001 prices.

    > I’ve been periodically checking back to see if you have the Austin Real Estate numbers for October?
    I’ll get the stats done during the Thanksgiving break. Thanks for asking.


  5. Regards to 2008 prices being 2005 which were themselves 2001 prices(LOL!), well, just depends how hard-up
    sellers get in 2008 to sell. I feel that if it gets that bad per loan issues AND out-of-staters selling houses, sellers
    will take homes off the market before they drop prices to the point that they lose all appreciation from the last
    two years. So many people have moved here in Austin the last few years as it is, so you can say it would simply
    be a consolidation of sorts, as things just slow down to a more normal pace, and the flippers and greedy take a
    long breather…..


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