Thursday, January 21, 2016

Texas economic boom about to lose lots of sizzle

Texas will be marked by significantly slower rates of economic growth and jobs that will put the brakes on soaring home prices, economist said.

The boom is over.
So says Jim Gaines, chief economist at the Texas A&M Real Estate Center, referring to the strong job growth and sizzling home prices that have buttressed the North Texas economy over the last few years.
n a phone interview, Gaines told us that 2016 will be “our transition year in Texas,” marked by significantly slower growth in the economy and jobs that will put the brakes on soaring home prices. He foresees growth in statewide gross domestic product of less than 1 percent, while home price gains could halve.
“The feeling of a boom economy is going to leave,” he said. “The question is not whether we’re going to slow down and possibly decline, but at what rate and what’s the timing."
Job growth has already slowed, particularly on the Fort Worth side of the Metroplex. The Federal Reserve Bank of Dallas reports that through November, employment in the Fort Worth area increased by only 0.2 percent last year, while jobs grew by 4.1 percent on the Dallas side.
In terms of housing, slower gains may still not be bad considering that strong sales pushed home prices to record levels in Dallas-Fort Worth over the past couple of years. For all of 2015, homes sales totaled 96,158 in the 29-county North Texas region, up 6 percent from 2014, the real estate center reported, and the median sale price grew by 10 percent to $205,000.
Gaines said the Texas economy, and DFW’s to some extent, was boosted by the resurgence in oil drilling in the Eagle Ford Shale and the Permian Basin. But with the collapse of oil prices last year and a pullback in drilling, that fuel is gone.
The oil bust has prompted some to warn that DFW home prices are now overvalued. In a recent report, Arch Mortgage Insurance listed Fort Worth and Dallas among the five U.S. metro areas most at risk for declining home prices. Houston — with its bigger energy industry — has the most elevated risk.
Gaines expects to see a slowdown in home sales soon, though it hasn’t shown up in the data yet. A very low inventory of homes on the market should continue to support price gains, even as sales slow, he said. But he still expects growth, not a return to the days of the Great Recession with job losses and foreclosures.
Link to full article here
By Bakers, Ahles, & Kaskovich for Fort Worth Star-Telegram

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