July 2007
Each month, Real Estate Center at Texas A&M University researchers gather together to analyze trends and forces influencing the Texas real estate market. For comparison purposes, they look at the national and international markets, too. One or two researchers spotlight their current projects and observations, but everyone chimes in with their ideas as well. It's enlightening but so fast-paced that a visitor recently wondered aloud if he should learn shorthand to keep up.
Before a recent meeting, the Center's chief economist, Mark Dotzour, Ph.D., sent a memo to all research staff. He asked them to come to the monthly meeting prepared to discuss questions such as:
Wait, there's more. Researchers also pondered questions like:
Needless to say, they didn't get around to covering all these topics. The meeting was only two hours long. But you get the idea of the scope of their thinking. Dotzour told the researchers to "start thinking about these questions and write them down over the coming weeks. My experience is that these kinds of ideas don't just come all at once. Instead, they tend to come in waves at
unpredictable times."
Here are some of the responses generated by these questions.
Unlike past housing downturns, this one is not preceded by economic downturn, rising interest rates, or unemployment … Causes for 2006-07 drop … falling affordability leading to lower user demand … excess building in fast-growing markets … slowdown in appreciation … falloff of speculative building and "investor" market … end of "easy" credit and terms.
Nationally, housing starts are down 27.7% … new home sales down 20.5% … new home inventory at 6.5 months (6.2 months last year) … median price down 10.9% … existing home sales down 7.6% with 8.3-month inventory.
Texas market overall still fairly strong … but definitely slowing … Home sales down about 1% … Inventory fairly constant at 5.5 months … Residential permits down about 27.3% … Texas home prices rising faster than U.S … First quarter 2007, U.S. up 4.3% … Texas up 6.9% … Texas still very affordable … median single-family home price up 4.1% to $146,200 … U.S. median $220,500 … Average Texas single-family home price up 7.6% to $193,700 vs. U.S. average $269,500.
Texas building permits down 23% in last year … Dallas down 35% … Austin down 34% … San Antonio 27% lower … Houston off 10%.
Number of out-of-state investors down … Californians have less money to invest … First-year real estate license renewals down … some get license just to save real estate fees, then get out … Lots of Texans still enrolling in real estate schools … Inflation bigger than first thought … Considerable cash sitting on sidelines wanting to get in game … Cap rates in Europe lower than U.S … doesn't make sense to buy foreign real estate … yields too low right now … Those making money do so taking underperforming buildings and fixing them up … or they buy land and develop it … or they buy large-cap stocks … Green building translates into green cash … Reducing a building's operating expenses is not only trendy … it's more profitable … More tenants asking about green amenities … green is off chart … 30% growth in number of green buildings.
So, what does it all mean? It means that Texans can rest assured that researchers are keeping their fingers on the pulse of our real estate economy. Each day they check the numbers, answer media inquiries, write articles, or give presentations. And around the first of next month, they will assemble again to explore answers that help us all make better real estate decisions.
