Texas’ Home Prices to Buck National Trend, Economist Predicts

COLLEGE STATION, Tex. – In a year when national home prices are expected to drop, a research economist with the Real Estate Center at Texas A&M University predicts Texas will emerge as one of the brightest stars in the housing market.

The National Association of Realtors (NAR) announced last week that home prices across the United States will probably fall in 2007 — a first in at least 38 years. But the Center’s Dr. James Gaines says Texas’ home prices will likely buck that trend.

Although it is too early to know exactly how 2007 will play out, Gaines said the year is off to a good start. Texas’ median existing home price increased by 3 percent from February 2006 to February 2007, and the state has less than a five-month inventory of unsold homes.

Gaines said Texas benefits from not having experienced the run-up in prices that other areas saw.

“For the last five or so years, areas like California, Florida, Arizona, Nevada, Virginia and Washington, D.C. have enjoyed their biggest housing boom. Now they’re seeing a huge decline in median sales, and it’s dragging the numbers for the country down,” Gaines said. “Fueling the decline in home prices is the recent fallout in the automobile industry in the upper Midwest.”

While Texas as a whole should avoid a decline in home prices, Gaines says individual markets are still mixed.

San Antonio’s median home price increase leads the major Texas markets at nearly 11.3 percent more than a year ago, and the local multiple listing service reports a less than five-month inventory of unsold homes.

Austin saw about a 7 percent increase in median home price from February 2006, while Houston had a 3 percent increase.

The Metroplex is the weakest of the four major markets, with median home prices down 2 percent in Fort Worth and up only 1 percent in Dallas. A recent news report stated that new home construction in the Metroplex is down 35 percent.

Gaines points out that Texas also relied a fair amount on subprime lending, and with mortgage woes sweeping the country, mortgage credit tougher to come by, and less attractive terms, some buyers are going to be excluded from the market.

However, interest rates are still low, and now is a good time to refinance in Texas for those living in areas where home prices are on the rise.

Overall, Gaines predicts Texas markets will stay reasonably strong compared to the U.S. this year and into 2008.

“Our population is growing by leaps and bounds and we’re continuing to create jobs,” he said. “More importantly, relative to many major market areas, we still have reasonably priced, affordable housing.”

The Real Estate Center (recenter.tamu.edu) has been providing solutions through research for 35 years. Funded primarily by Texas real estate licensee fees, the Center was created by the state legislature to meet the needs of many audiences, including the real estate industry, instructors, researchers and the general public.

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