Economist: Housing Affordability Will Lead to Texas Boom

By Alton Gary Simpson

COLLEGE STATION, TEXAS – Housing affordability will be the “most significant growth stimulant” for Texas over the next 25 years, according to Dr. Jim Gaines, research economist for the Real Estate Center at Texas A&M University. In mid-2007, the median sales price of a home in the state was $151,000; a little more than two-thirds of the national median sales price of $229,000. In comparison, the median price of a Texas home was about 75% less than the $589,000 median priced of a home in California. Dr. Gaines stated that housing affordability would be one of the most important factors driving the state’s growth over the next 25 years.

“Texas is the most housing-affordable, high-growth state in the nation,” said Dr. Gaines. “So far, skyrocketing home prices common to fast-growing states like California and Florida have not occurred in Texas.” According to the Texas Housing Affordability Index he compiled, a Texas family earning the statewide median income has 152% of the income required to qualify for financing on the median-priced home. Nationally, families have about 16% more than is required.

There are other measures that show how affordable Texas homes are. One expresses median house value as a multiple of median housing income. The lower the multiple, the more affordable the housing. According to Dr. Gaines, “In 2005, the national median home value was 3.62 times the median household income. In Texas, the median value was only 2.52. Current median prices to median household income multiplies are even higher, and the difference between Texas and the nation are even more pronounced.

“He noted that housing affordability is just one card in a deck that’s stacked in the state’s favor. The other winning cards include lower cost of living and cost of business, greater employment opportunities and an appealing lifestyle. He wrote in the latest issue of Tierra Grande magazine, a periodical sent to Texas’ real estate licensees, “Events and circumstances point toward a Texas-sized boom between 2005 and 2030. The state’s population and economy – as well as its housing and commercial real estate markets – are poised to explode in volume and prices.

” Dr. Gaines added that the state’s population is projected to grow by 13.6 million by 2030 and that most of the growth will take place in Texas’ urban areas. He said that four out of every five Texans would live in the Dallas-Fort Worth-to-Houston-to San Antonio triangle. He added that if the state maintains its average employment-to-population ratio during the next 25 years, the state would add between 4.5 million and 5.8 million jobs. The combination of more people and more jobs should lead to higher personal income.

“Extending the long-term trend that began in 1969 suggests the state’s total personal income could increase by $1 trillion by 2030,” said Dr. Gaines. “The 2005 Texas median household income of $42,139 could reach nearly $68,000 by 2030.” He added that along with the gains would come the same growing pains experienced by other high-growth states, as the projected population and employment boom strains local and state resources to provide public services and infrastructure.

“State and local fiscal capacities will be stretched, and Texans will debate the level and type of growth they want in their communities,” he said.

For more information about real estate issues in Katy or West Houston contact Steve Reddell. He is a licensed REMAX real estate agent in Katy Texas you can trust. You can contact him directly at 281-994-5173. You can also visit him on the web at www.katyfamilyhomes.com.

Filed under: Economy/Market, Katy Family Homes