Dallas Housing Market Bubble Deflating

In Texas, where oil drilling and the rugged frontier are deeply embedded in state mythology, the natural economic cycle of boom and bust is familiar.
But in recent years, one sector of the state’s red-hot economy seems to have overcome the laws of gravity. The Texas housing market, and the growth of its big cities, has become a boom that some see developing into a bubble. After outpacing much of the country’s housing growth, one may assume that a reverse in course is nigh for Texas.
Some analysts, though, see things differently: Texas real estate isn’t just booming. It’s evolving.
According to Dr. Jim Gaines, chief economist at the Real Estate Center at Texas A&M, the state is experiencing a fundamental shift. Based on data from the center’s most recent Texas Housing Insight report, released earlier this month, he sees the state in the midst of a long expansion, as it becomes not just a leading state, but perhaps a center for growth for the U.S. for years to come.
The state’s two largest metro areas, Houston and Dallas-Fort Worth, exemplify the state’s evolution. Last year, both cities issued more single-family housing permits than any other cities in the country, including fast-growing cities like Seattle. That alone isn’t shocking, considering they’re metro areas of 7.1 million (Dallas-Fort Worth) and 6.4 million (Houston) people. But both areas also issued more new housing permits than most states.
Dallas built 29,000 homes last year, according to data gleaned from Metrostudy. The entire state of California only added 88,000 units.
California had a huge boom, from the postwar period through the ’90s. Florida saw a population explosion in the 20th century. Now, Gaines says, it’s simply Texas’s turn.
“We’re going through the same political and social/sociological effect that happened in Florida, New York, and California,” says Gaines. “The public sector almost can’t keep pace with this growth. The good news in Texas is that land is plentiful.”

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