The real estate editor at the Texas A&M Real Estate Center recently wrote some interesting things about Texas Real Estate:
In their annual outlook for Texas, economists for the Real Estate Center outline their reasons for optimism in 2006.
Interest rates. The Federal Reserve raised its influential fed funds rate six times in 2005. While the rate hike raised short-term interest rates (bank loans, credit cards), so far long-term interest rates have not been significantly influenced. In November, a 30-year, fixed-rate mortgage was 6.36 percent.
"In December, the 30-year, fixed-rate mortgage rate was 6.27 percent," Gaines said. "The average rate for all of 2005 was 5.87 percent; it was 5.84 percent in 2004. For 2006, the rate is expected to be between 6.4 and 6.9 percent."
Personal income. Texas ranks 12th among all states in personal growth income. Total personal income is closely related to total output. A higher-than-national-average growth rate means the state's economy is growing strongly.
Employment. For the year ending in October 2005, Texas nonfarm employment added 69,000 jobs. After lagging the nation for much of the year, Texas' employment growth for October trailed the United States by only 0.6 percent. Meanwhile, Texas unemployment hit a four-year low -- 5.2 percent.
Home prices. While Texas has an active, record-setting housing market, prices are increasing much more slowly than in the rest of the country. Fears the state has a housing price bubble that may burst are not supported by facts.
In the first half of 2005, Texas' 4.7 percent house price appreciation rate was less than half the 13.4 percent national average. The average price for a Texas home in September 2005 was $176,800 or 15.9 percent higher than it was in 2002.
"Through the first three quarters of 2005, Texas' 6.3 percent increase in the median priced home was less than half of the 14.7 percent national increase," Gaines said.
Home sales. An estimated 269,000 homes were sold by Texas Multiple Listing Services in 2005 -- 34 percent more than three years earlier.
Home construction. Low interest rates and aggressive home loan financing continue to drive the state's housing boom.
"Total 2005 single-family permits of some 166,500 represent an increase of about 10 percent over 2004," said Gaines.
Housing supply. Experts at the Real Estate Center say there is no reason to anticipate a housing shortage that would drive prices up. Likewise, they do not expect an oversupply that would depress the market.
The 2005 estimated 5.6-month inventory of unsold existing Texas homes was only slightly less than the six-month inventory generally considered a balanced market.
Housing affordability. Overall, Texas' housing market continues to offer highly affordable homes without excessive price inflation. Price increases, sales and construction levels in 2006 will probably be equal to or slightly less than the 2005 rate.
Mortgage market conditions and general economic growth will determine the market for the remainder of the decade.
Commercial markets. More Texas cities are expected to embrace developments that use different combinations of retail, residential, office and even hotel space. At a time of skyrocketing fuel prices, this will save Texans transportation time and money.
Increasing construction costs are not expected to dampen new office development.
Land markets. Recreational buyers and investors are vying with farmers and ranchers for available acreage. Expectations of anemic returns in other investments have contributed to a thriving Texas land market.
The median price of an acre of Texas land during the first half of 2005 was $1,379 -- 11 percent more than a year earlier. Meanwhile, the number of sales fell from 4,711 to 3,367, and the average size of a sold tract fell from 108 to 102 acres.
