30th Jul, 2013

United States Land Bubble Skips Texas

It’s usually easier to analyze the past over time.  Now that several years have gone by and housing prices are stabilizing throughout the United States, experts who analyzed the Texas real estate markets from the mid-2000s have come to some interesting conclusions.  Land prices shot up, but the costs for building homes did not.  Texas avoided the housing bubble because the state has lots of open, accessible land.

So inside the Texas Hill Country real estate market, in the surrounding Austin and San Antonio metropolitan areas, as well as in the Dallas/Fort Worth and Houston markets, buyers did not experience skyrocketing prices for Texas properties.  The market did experience a slowdown in new construction of homes in Fredericksburg.  Essentially, unlike many other states, large numbers of Texas property owners and subdivisions did not lose value.  Rather, the pace of real estate market in Texas simply slowed down.

Ali Anari and the Real Estate Center at Texas A&M University have concluded that the housing crisis was not caused by rising prices of homes but rather by rising prices of land.  In his article entitled “Land, Lots of Land” published in Tierra Grande (07/2013), Anari compares the values of average single-family detached homes in four metropolitan areas of Texas versus for the California metro areas.

From 1984 through 2012, land values in Texas improved gradually.  They stabilized over the past six years, with the exception of the Dallas area where prices decreased slightly.  Prices in the Houston real estate market increased fairly dramatically over the last year.  The four California cities experienced dramatic rises and extreme plummeting of values.  Due to the abundance of land in Texas, however, since 1984, the Real Estate Center discovered land values in the four Texas metro areas in general have actually gone down.

Texas Hill Countyr OakThe study also examined the structural costs of average single-family detached homes.  Published charts for home-cost components in Texas and California followed practically identical trajectories over the 28-year period studied.

Comparing the real estate markets in the two states, it becomes obvious that the increasing prices for land caused the bubble – not the prices for homes.  Anari sums up how the bursting bubble skips Texas.  The U.S. housing crisis was partially caused by a land-price bubble not a housing-price bubble.  Since “the land compounded of housing prices soared elsewhere, Texas had plenty of relatively low-cost land combined with efficient statewide land acquisition and development processes.”

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For information about real estate and investment properties in Fredericksburg and throughout Texas Hill Country, please call Dale E. Cook, MBA and owner of SAGE – Premium Texas Real Estate located in the Chase Bank Building in Fredericksburg at (830) 992-0056.

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