Texas Is Responding With Grit to the Foreclosure Related Crisis

Texas has learnt its lessons from past mistakes and is now responding with grit to the foreclosure related crisis. It has stopped relying on only one source for the health of its economy and his diversified from oil to other streams of activity. This comprehensive approach has allowed its real estate market to remain stable despite the onslaught from foreclosures. However mixed signals are coming through, causing concern for many in Texas. There are fears that 2009 will be a difficult year for Texas.

The general mood of the country has shaken the confidence of consumers even in Texas. Economists Perryman and Dotzour analyzed that the state was able to avoid a crisis in the housing sector because long before the long list of unsold reo homes began to become a problem, the builders had put a brake on their projects. Thus Texas had avoided speculation that has been the bane in states like Arizona, California and Florida. In those states house values are plummeting by anything from 30% to 40%. It is rather surprising because some of the jumbo builders in Texas were the same ones operating in the problem states. Dotzur commented, “I remember thinking in 2007 that those big homebuilders, when they cut their volume back in Nevada, they may try to really juice up their volume in Texas. I was pleasantly relieved to see that our new home starts were dropping at the same percentage level as you were seeing on the East and West Coast.”

Perryman finds another key reason for Texas holding steady on the real estate front. He reasoned that Texas had been the “first and worst” hit by the savings and loan crisis about two decades ago. It had swept over the entire country ultimately. That crisis had left behind a system of relatively smaller localized banks. These banks “had very strong, very conservative lending practices. We weren’t involved in the sub-prime (lending crisis) … and haven’t had the same difficulties as other places have had.”

As far as 2008 was concerned Perryman said it was a good year for heavy commercial constructions including $1.2 million Dallas Cowboys stadium coming up in Arlington and other large hotel projects in Dallas-fort Worth and Houston regions. One should be cautious of the fact that right now commercial building has become a sort of bubble in Texas, warned Dotzour. The job market is giving out negative signals.