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By Jennifer Hiller - Express-News
While residents of some other states gleefully flipped houses for enviable profits a few years ago, Texans settled for solid yet totally unremarkable price appreciation.
Now that the merrymaking has stopped elsewhere, Texas remains one of the few states that the national real estate bust hasn't messed with — at least not too much.
But why?
Several factors led Texas to this so-far fortunate position, experts say.
Easier development regulations make home building — and buying — more affordable in Texas and keep price appreciation in check. And more stringent home equity restrictions also have helped Texas dodge some of the worst problems of the bust.
By and large, home prices across the state have held steady. In the cities where prices have declined, the drop hasn't been the of the lose-your-lunch variety.
“Obviously slow and steady is the preferred rate to move when you look at other parts of the country where there was a bubble,” said Cassie Gibson, senior vice president of research and consulting at Residential Strategies Inc.
But before “Everything's-Better-in-Texas” pride takes over, there are also the state's high property taxes and home insurance premiums, which increase the carrying costs of homeownership.
“It's all tied together,” said Jim Gaines, research economist with the Real Estate Center at Texas A&M University. “A big part of the monthly mortgage payment is for taxes and insurance, so home prices can't go too high.”
And although local builders and developers might disagree, both Gibson and Gaines said Texas throws far fewer barriers in front of residential development than other parts of the country.
“We're a highly non-regulated state and an easier state for our home builders to build houses without undue delay and cost,” Gaines said. That keeps the cost of new and existing homes in check.
The state's homestead law — the same one that keeps creditors from seizing your house — also likely played a role in insulating Texas.
Jeffrey Forrester, past president of the San Antonio chapter of the Texas Association of Mortgage Brokers, said that while residents in many other states could borrow up to 125 percent of the value of their home, the Texas homestead law limited Texans to borrowing no more than 80 percent on a home equity loan.
Forrester said the ease and availability of 125 percent loans encouraged prices to keep rising in states like California, then discouraged owners from keeping homes once the market turned.
“People would flip a house in two years because the next buyer knew they also could go out and get a 125 percent loan,” he said. “Our homestead law actually looks out for the homeowner's interest. It says, ‘We want you to have a reason to own that home and not work it like an ATM machine.'”
So can Texans gloat now that it missed out on the misery?
Not yet.
Gibson noted that the Dallas branch of the Federal Reserve predicts job losses in all Texas metropolitan areas this year.
And Gaines said that the Texas economy often lags the national economy.
“Is it coming?” Gaines asked. “I think it is. We're just entering the recession that the rest of the country entered 18 moths ago. But I don't think it's going to be nearly as bad here as everywhere else.”