Houston, Dallas, Austin Real Estate bubble?

Sam

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Fellow Texans,

With all the talks about the bubble in RE happening accross the US, are you Texans worried at all?

I'm in Houston.  Price is so low, and has been so stable in the past 10 years or so, that I expect no negative effect.  What is your view?
 
Sam said:
I'm in Houston.  Price is so low, and has been so stable in the past 10 years or so, that I expect no negative effect.  What is your view?
Perhaps you've forgotten the 1980s real estate collapse, but it was so bad that I remember it from a shipmate buying a Houston 2BR condo in a swingin' yuppie neighborhood-- for $20K.

I believe that was 1985 (I could be wrong but it was during the pits of the collapse) which in today's dollars would be about $38K.

Is Houston back down to those prices yet?
 
We go to a seminar every once in awhile... from the guy that has been tracking the economy of Houston for about 40 years or so...

He does not see a bubble in Houston.  I do not know about the rest of the cities..  However, he said that we would 'feel' the effect as it will have a dampening effect with the coasts having problems...  ie, if they get a cold, we get a cold... just not as bad..

And we were lucky in that our 'bubble' as it were was taken away by the Katrina contingent.. if they start to move back, then apartments open up, become cheaper, making homes less attractive etc. etc...
 
The boom in residential RE was late in getting to my area (San Antonio), but it is hotter here that it has ever been (17 days of 100+ temps in August ;))..and so is the RE market. The double digit percentage increase in home prices over the past year is unprecedented. However, inventories are growing as well (up over 13% in the past 6 months) while new subdivisions are popping up everywhere you look. I’m not sure about the current situation, but a few months ago a typical new home buyer would make a down payment on a house that wouldn’t be completed for 10-12 months.

The median price of a home in this area is $179,000, up about 10% over the past year, but flat for the past 3 months. Not a bubble by my definition, but I do have concerns about the possible effect of the huge number of new homes being built if there is a downturn in the local economy and/or a further increase in interest rates. The employment picture here is currently very strong…and history tells us that will not last.
 
Nords said:
Perhaps you've forgotten the 1980s real estate collapse, but it was so bad that I remember it from a shipmate buying a Houston 2BR condo in a swingin' yuppie neighborhood-- for $20K. 

I believe that was 1985 (I could be wrong but it was during the pits of the collapse) which in today's dollars would be about $38K.

Is Houston back down to those prices yet?

Actually, in some really bad areas of town.. these prices never left...  a friend of mine owned a two bedroom townhouse... sold it a few years back in the mid 30s... but some were not as good and were still selling in the high 20s...  you would not want to live in this area.. you can hear gunfire at night.. once he heard a machine gun being fired..
 
Nords said:
Perhaps you've forgotten the 1980s real estate collapse, but it was so bad that I remember it from a shipmate buying a Houston 2BR condo in a swingin' yuppie neighborhood-- for $20K. 

I believe that was 1985 (I could be wrong but it was during the pits of the collapse) which in today's dollars would be about $38K.

Is Houston back down to those prices yet?

I was not in Houston during that crash, but I was well aware of it.  I knew a few people who left Boston 1979-1981 and moved to Houston to join the oil boom.  They did extremely well for a few years, and then got burned badly by the oil bust.  Several lost their homes.

On paper, they said that Houston properties lost 21% in value at the lowest point, 1988 I think.  In reality, a few acquaintances of mine picked up a few properties at 25% of the boom price.  So yes, 20K for a condo is pretty common.  Yes, Houston has fully recovered from that.   According to the latest report (http://www.har.com/mls/dispPressRelease.cfm), the average condo/townhouse selling price last month is 146K.

This may be a difference in terminology, but I don't consider the 82-88 Houston bust a bubble.  In my view, a bubble is when speculation drives up the price.  The bubble busts when the price is no longer sustainable.  Houston did not see that.  Houston collapsed because oil in the middle east was made cheaper.
 
I'm just outside of Houston, near the airport, and in my little suburban neighborhood, the houses on the market are staying there longer (4-5 weeks) than in the past year, but sales still exist. We do have the benefit of being able to purchase a 2800 sq ft. 4bdrm 3 1/2 bath 2 car garage on a big lot at the end of a cul;-de-sac built in 2001 with tile, wood floors, granite counters... for $180,000.
 
The fundamental driver for real estate is income.   Income tends to rise a bit faster than inflation, and home prices tend to follow that same trend (except when speculation or overbuilding enters the picture).

With that introduction, heeeeeeere's Texas:

OT-Texas.PNG


Looks like Texas overcorrected after the 80's bust.   Austin had a nice little spurt starting around 1999 that puts it about where it should be in terms of the long-term trend.   Other areas are cheap.   San Antonio is just starting to make a move that could bring it back to the inflation trend line.

Maybe.  :)
 
Here in the burbs of DFW, you can't swing a dead cat without hitting a new McMansion farm. Anecdotally, there's so much supply, it's hard to imagine a price bubble, though, if the economy turns sour enough, the surplus of new homes will tend to dampen, if not curtail, appreciation of existing homes.

My house was appraised at $112k in 2000; it's a bit north of $130k now.
 
wab said:
With that introduction, heeeeeeere's Texas:

Thank you for that graph.  Out of curiosity, I check out the graphs for California and Massachusets.  Scary would be an understatement. :eek:
 
I had a travel to Houston last month. One guy there told me he just bought a brand new house with 3600SF at Sugar Land. Similar house will ask for 1M at least at NYC area. Consider the income, he said a 100k IT worker at NYC could find a 80K job at Houston. The tax factor favors Houston also.

I donot think there is a bubble there.
 
Tons of homes for sale here in the DFW area...
foreclosures are on the increase too... Methinks
this would negatively affect home prices... it is
definitely a buyers market... but I'm not buying !
 
Darn it! I sold my Austin house 1 year too soon! Sold it exactly 1 year ago.

Oh well.......

Sure has been nice not owning a house.

I've talked to some folks trying to sell houses - houses on the TX coast are really hard to sell right now. One couple has been trying to sell their house on Padre Island - no luck.

Audrey
 
audreyh1 said:
Darn it!  I sold my Austin house 1 year too soon!  Sold it exactly 1 year ago.
Oh well.......
Asked how it was that he was so successful in the stock market, legendary financier Bernard Baruch replied, "I always sold too soon."
 
audreyh1 said:
Darn it! I sold my Austin house 1 year too soon! Sold it exactly 1 year ago.

Oh well.......

Sure has been nice not owning a house.

I've talked to some folks trying to sell houses - houses on the TX coast are really hard to sell right now. One couple has been trying to sell their house on Padre Island - no luck.

Audrey

It is interesting... there are many reasons IMO... but from what I see the prices are too high.. at least in Galveston and around Clear Lake... where I was looking for a small condo.. but for Padre Island (as is most coast line), the insurance costs are going up and that factors into the cost of ownership..
 
Our friend said housing sales on the TX coast took a beating after Katrina. I guess that made quite a few people change their minds about coastal property.

As far as I know that was the only area booming in TX real estate (pre Katrina).

Audrey
 
Nords said:
Perhaps you've forgotten the 1980s real estate collapse, but it was so bad that I remember it from a shipmate buying a Houston 2BR condo in a swingin' yuppie neighborhood-- for $20K. 

I believe that was 1985 (I could be wrong but it was during the pits of the collapse) which in today's dollars would be about $38K.

Is Houston back down to those prices yet?

I got caught in that downdraft in 1988 in Austin. Bought at the peak....tried to sell in the trough. :mad:

I had to get a personal loan to pay off my mortgage to protect my credit history. We lost all our equity from the previous moves and 3 previous house sales. It was quite a blow to us financially. We ended up living in a very small apartment for a year to save some money for a house in our new city.

It still gives me chills to remember that period of time. :p The house was eventually sold to a broker for far less than I paid for the house. Over a 6 month period we tried to sell it we had 2 people look at it. It was a nice house in a decent area and close to schools and town but the market was a mess and nothing was selling so prices were dropping daily.

BTW, the epicenter for this was Houston. The overbuilding spread to Austin and surrounding areas and when it stated to falter in Houston, Austin got sucked into it too. Don't remember about San Antonio or Dallas but Austin and Houston RE was a mess; especially commercial. "For Lease" signs everywhere yet they were still building office space like there was no tomorrow.
 
SteveR said:
Don't remember about San Antonio or Dallas but Austin and Houston RE was a mess; especially commercial.

San Antonio and DFW were affected as well.  Look at the chart wab posted earlier in this thread.  There was a brief time delay after Houston, but all 4 cities were hurt.
 
SteveR said:
It still gives me chills to remember that period of time. :p

People left their house keys in the door. They just up and left town, never to return. :eek: My neighbors did it. The house was open and there was a useless checkbook on the abandoned kitchen table. The phone had been thrown through a window and was laying outside. As a kid, it was somber exploring.

It took about 7 years to recover.
 
eridanus said:
People left their house keys in the door. They just up and left town, never to return.  :eek: My neighbors did it. The house was open and there was a useless checkbook on the abandoned kitchen table. The phone had been thrown through a window and was laying outside. As a kid, it was somber exploring.

It took about 7 years to recover.

Its according to what you mean by recover... my house value has just gone over what the previous owner to me paid for it... I got it at a 50% discount from his price... and it still went down from my purchase price by 10%...
 
I am not as pessimistic as others here regarding the outlook for TX real estate. We are under valued compared to many parts of the country, jobs markets are good, and there is no state income tax. I expect to see steady influx of folks relocating to states like Texas, both baby boomers and those in their 20-30s that want outdoor lifestyle and reasonable cost of living. Will values here decline if real estate totally tanks, yes, but I don't expect to see a huge downward correction like many states will experience. Since I live in a desirable city, that is largely built out (not having to compete with new construction), I am not concerned about seeing my home value implode.

DFW
 
DFW_M5 said:
I am not as pessimistic as others here regarding the outlook for TX real estate.  We are under valued compared to many parts of the country, jobs markets are good, and there is no state income tax.  I expect to see steady influx of folks relocating to states like Texas, both baby boomers and those in their 20-30s that want outdoor lifestyle and reasonable cost of living.  Will values here decline if real estate totally tanks, yes, but I don't expect to see a huge downward correction like many states will experience.  Since I live in a desirable city, that is largely built out (not having to compete with new construction), I am not concerned about seeing my home value implode.

DFW

I think you misread the posts.. we are not saying it is about to implode... that it is still under historical values from the LAST implosion... and that if the coast 'get sick' we will feel it a bit.. but no implosion...
 
I live near Houston and this summer the price of homes in my neighborhood have jumped in a bubblesque fashion. Fortunately, the surge in home prices (from $260K to the $325K to $375K range in just one year) occurred after we successfully achieved a reduction in property taxes because home prices hadn't gone up in 6 years.

So I don't see any drop in home prices in the forseeable future, but only increases. Well, at least until all the out-of-staters moving here come to their senses and realize that $350K for a house is not a bargain, but paying way too much.
 
Texas Proud said:
I think you misread the posts.. we are not saying it is about to implode... that it is still under historical values from the LAST implosion...  and that if the coast 'get sick' we will feel it a bit..  but no implosion...

Texas Proud,  I am simply expressing my opinion in response to the original post and my observation of the tone of several of the posts in this thread.  If you don't agree with my view/comments, thats fine, but you should speak for yourself and not use the collective "we are not saying."

Cheers,

DFW
 
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