As the housing market continues to decline in areas around the country, especially Florida and California, and with the threat of a recession looming like a dark cloud overhead, Texas' economy and housing market remains strong.
According to numbers released by the U.S. Census Bureau, eight out of the 10 fastest-growing metropolitan areas in the U.S. are in the South, and the South also accounted for more than half of the 50 fastest growing regions.
Dr. James Gaines, a research economist at the Real Estate Center at Texas A&M University said, “From 2000 to 2007, 3 million people moved to Texas, a 14.6 percent jump in the population, making Texas the fastest growing state in the country.”
“In the next 25 years we'll add another 13.6 million people, that's the equivalent of another Metroplex, metropolitan Houston and metropolitan San Antonio with enough left over to add another Corpus Christi.”, he said.
Dallas/Fort Worth drew in more people than any other metropolitan area in 2007. The population there increased by 162,250 between July 1, 2006, and July 1, 2007, according to a new U.S. Census Bureau report. Houston, Atlanta, and Phoenix also witnessed a swell by more than 100,000 people each.
With its affordable housing, low cost of living and cost of doing business, rising employment opportunities and attractive lifestyle, more people than ever before are being drawn to Dallas. Unlike many other parts of the country, the Dallas/Fort Worth market has not become saturated with too many homes. This is simply because companies continue to seek out the Dallas/Fort Worth market, creating new jobs and bringing in people who eventually become homebuyers and renters.
While the rest of the country suffers from rising mortgage foreclosures, declining housing prices and weekly real estate auctions, home prices in Dallas have avoided the speculative bubble that rapidly drove so much of America's real estate to record prices and record unsold inventory levels.
Home prices in the Dallas area have increased a steady 17% over the last five years, while the U.S. averaged an extreme 53.5% increase during the same time period according to the Office of Federal Housing Enterprise Oversight. The key point here is that the rise was steady and occurred over time, minimizing the risk of a deflating market pendulum swing as evidenced in other overheated markets around the country.
Dallas has consistently outpaced the rest of the country on nearly every important economic stability indicator and is currently running counter to national housing trends for three main reasons:
First, Dallas continues to offer a very robust job market which supports its housing demand and stable home prices. Texas is adding about 250,000 jobs per year — nearly double the rates of Florida, Arizona and New York. The Dallas metro area alone added over 90,000 jobs in 2007, leading the nation as one of the top 10 cities in employment growth. This year local employers are anticipated to create 35,000 new jobs according to a report by Marcus & Millichap. This increase in jobs, incomes and availability of living space helps keep new and used house prices in the Metroplex safe from excessive price increases and corrections.
Second, the Dallas Metroplex has an abundant supply of land coupled with favorable zoning regulations. These factors allow the market to keep up with demand and give builders easy access to enter the market as market conditions change, effectively creating price and supply stability.
A third reason is its physical location being centrally located within the US and near Mexico making it a strategic hub for commerce. With its Dallas/Fort Worth International Airport and mild climate, Dallas has attracted a large number of corporate relocations across a broad range of industries, notably transportation, aerospace and defense, financial services, high-tech electronics, retail and wholesale trade.
The Dallas housing market is expected to be in the top five in terms of building equity until the year 2012.
According to a study by the Center for Economic and Policy Research, the Dallas market is expected to be in the top five in terms of building equity until the year 2012. The study finds that a buyer purchasing at 75% of the area's median price could gain more than $80,000 in equity over the next four years.
Mark Dotzour, chief economist at Texas A&M University's Real Estate Center, said that the study's findings confirm the relative strength of the state's housing market. He says, “There is a lot less downside risk to buying a home in any of these cities and a lot more upside potential.” He adds, “There has never been a price bubble in Texas.”
Texas' appreciation rates over the past 10 years have never been out of control, usually hovering between the 4 percent and 6 percent range. During the first quarter of this year, Dallas area housing prices rose 3.76 percent over last year. As an investor you need to compare those gains to the 3.1 percent decline seen nationally.
Not surprisingly, even the Dallas commercial real estate market is also in a boom right now according to nearly 3,000 commercial industry players who met at the Urban Land Institute's gathering this past May.
The Dallas rental market continues to stay strong as rents edged to a record high and were up in every area of the city. Interestingly, at the same time, the Dallas market continues to have some of the lowest average apartment rents for a big-city market.
Even with the fact that lenders are still hesitant to approve mortgages for many first-time home buyers, the demand for rental units continues to increase. In 2007 the Dallas rental market was tight enough that developers were able to increase average rents by 4 percent.
Investor's should pay close attention. By virtue of its robust job growth, abundant land resources, and strategic geographic location, Dallas has avoided the major housing problems that affected many other U.S. markets and is positioned to continue its strong economic and housing market growth for years to come.