Because they have a pay wall or whatever you call it, I cannot link you to this cool piece in today’s WSJ urging real estate investors to be bullish on investing in Texas real estate — both existing and new home construction, and home builder stocks. Why? Because of everything I’ve been preaching here these last few months: we have jobs, population, stable home prices, and no bubble.
“Texas’s greatest advantage may be housing demand. Its population grew by 3.9 million, or 19%, last decade, leading to a natural increase in households. The economy is stronger than in most parts of the country, with unemployment also holding at 8.3%, below the national rate.”
Which reminds me. The April issue of D Magazine ran a story on “How Missing The Bubble Hurt Dallas” by Joseph Guinto. When I read it, I was furious, and not because it was not my by-line. I was furious because the writer missed one of the most giant reasons why our market tends to be more stabilized than others: we cannot mortgage away our homes or use them as non-stop piggy banks. Mr. Guinto is probably too young to remember the days (I sure do) when we couldn’t even borrow one penny against our home equity in Texas. Now we can, and oh how the banks loved that little change, but we are limited to 80% of the total mortgage debt of the fair market value of the home. Explained here, but if you have $50,000 in equity on an $80,000 home you can only borrow 80% of that equity, or $34,000. And you can only make one home equity home loan per year, regardless of how fast you paid it back. Texas laws protect us from ourselves — this did not happen in other states like Florida, California and Nevada.
Well la de dah, now the Wall Street Journal has picked up on that. Get this:
So it’s important to have a view on which markets will recover most smoothly. Among those with the best prospects is Texas, which barely participated in the real-estate bubble. Home prices in Dallas, for example, are down only 7% from their peak, according to S&P/Case-Shiller.
Texas may have avoided the excesses of other states partly because of laws enacted after its own property bust in the 1980s. Back then, an oil boom created plenty of investment demand. And thanks to partnerships designed as tax shelters, property investments offered sky-high returns.
Later, tax reforms took such structures off the table. What’s more, Texas is one of a few states that taxes property but not income. That likely tempers demand for real estate because pricier homes have a big impact on total taxes. Texas also has lower-than-average foreclosure rates, thanks partly to limits on home-equity lines of credit.
Ah ha, did you catch that? Higher property taxes DO HAVE a bearing on home prices, you betcha. So everyone wants to come here (and to Florida) because we don’t have a state income tax, but they won’t buy buy buy because of the real estate property taxes which are among the highest in the nation. So I don’t want to hear anything about 10 cents more here or there for better streets or convention trips or whatever. Hold the line on spending at City Hall. The Wall Street Journal has spoken: higher property taxes hurt and hamper our real estate values.
But I am way happy we did not have a bubble here. I didn’t want to be rude after the article came out, because the graphics were so nice, but folks in those bubble towns were only paper rich. Here in Dallas, we are dirt-rich.
