“Housing Bulls Should Try Texas” - that’s a featured story in today’s Wall Street Journal. The main reasons given in the article are:
- Demand - 19% population growth in the last ten years, strong economy, and below average unemployment (8.3%).
- Laws - After the 1980s real estate bust, Texas enacted laws to keep investors from taking advantage of the real estate market. Plus Texas has “tight limits on home equity lines of credit” helping to keep foreclosure rates lower than most.
- Taxes - Since Texas is one of the few states that taxes property, but not income, demand for high priced homes (with high taxes) is smaller.
- Supply - Thanks to the environment in which Texas home builders work, new home supply is pretty much in balance with demand - in Austin it’s a 3 months supply (other states have over 10 months worth). Additionally, Texas has not seen a glut in the lot market. For example, in Austin there is a 37 months supply (24 months would be great - and Austin is seeing a decline in supply) - whereas cities like Denver and Phoenix have 90 months and 98 months respectively.