I have written for many months about how Texas has suffered much less in this recession than other parts of the United States. Some it that was due to the fact that we had a significant correction in home prices when the dot-com bubble burst in 2000/2001. Even more important was that fact that market appreciation stayed at very reasonable, down to earth, levels since then — not the stratospheric rises that California, Arizona, Nevada, and Florida experienced.
As much as many enjoyed the dynamic markets in those places, it is worth remembering that “dynamic” means uncertainty on the upside and on the downside. They had much farther to fall when the market tumbled than we did.
The current issue of Tierra Grande, the Journal of the Real Estate Center at Texas A&M University, includes a very informative article that is closely related:
It turns out that in markets where housing consumed the largest shares of household budgets, the impact of the recession and housing downturn since 2007 have been felt the most dramatically.
Among all major metro areas in the United States, consumers in Houston and Dallas spent the least (18.6%) on housing as a percentage of their total household budgets. From 2007 to 2009, the median home price in Houston went UP 0.4%, and the median in the Dallas area fell by just 3.8%.
At the other end of the scale, consumers in the San Francisco area spent 27.3% of their budgets on housing and in San Diego area housing took 30.8% of the average household budget. Median home prices fell 38.7% and 38.9%, respectively, in those metros.
As always with this kind of analysis, the correlation is not perfect, but the deviation does not blur the importance of this one
factor in explaining the magnitude of the housing downturn.
I have not made the time yet to find the Austin Metro data on ousing costs vs. household budgets, but there is no doubt that it was much lower at the beginning of the recession than San Francisco and San Diego. Here is a somewhat indirect comparison of the Austin area with the other Texas metros used in Tierra Grande’s article:
So, housing in the Austin area in 2008 was more affordable than in Houston and Dallas. You would expect the effect of the recession so be even more moderate here, and that is what happened:
The median price in December 2009 was 8% higher than January 2007, and the trendline shows modest price appreciation over this three-year period. As I have also written often, the strength of our local/regional economy, limited decline in local employment early in the recession, and earlier entry into recovery have helped Austin, but the Real Estate Center at Texas A&M has highlighted a very important correlation worth paying attention to.