Soaring home prices may hurt Texas' competitive advantage, says Dallas Fed
For Immediate Release: Mar. 10, 2017
New Southwest Economy also looks at state’s 2017 growth outlook, Dallas’ success
DALLAS—Soaring home prices and a tight supply of starter homes have eroded Texas’ cost-of-living advantage, according to the latest issue of the Federal Reserve Bank of Dallas’ Southwest Economy.
“Since the housing recovery began in 2011, Texas has seen unprecedented home price appreciation with home price gains here outpacing those nationally,” said Dallas Fed economist Laila Assanie in a video accompanying the report’s release. “This run-up in home prices is unusual for Texas, where construction tends to respond quickly to an increase in demand because of the state’s vast supply of flat land and relatively few building regulations versus other large states.”
Housing affordability has also declined, Assanie writes in “Texas Housing Market Soars to New Highs, Pricing Out Many.” While Texas’ nominal median existing-home sales price rose 34 percent from 2010 to 2015, median income only increased 14 percent. In addition, the supply of starter homes—those priced below $250,000—shrank considerably between 2011 and 2016.
“Declining housing affordability in the state has eroded the cost-of-living advantage, calling into question whether Texas can maintain its long-term economic and population growth that has often led the nation,” Assanie said.
Dallas is the least affordable metro area in the state, and Austin’s affordability has declined sharply as well.
While housing affordability remains an issue, the Dallas metro area has remained a bright spot in the Texas economy, write Michael Weiss, Pia Orrenius and Assanie in “Dallas Booms Through Texas Oil Bust.”
Even amid the downturn in oil prices, Dallas continued to post strong job growth, expanding by more than 3.5 percent annually from 2010 to 2016. This growth spurt has been fueled by business relocations and consolidations, as well as high rates of in-migration of workers from other states and countries.
In “Texas Economy Shifting into Second Gear in 2017,” Keith R. Phillips and Christopher Slijk look at the state’s economic outlook as a whole amid a recovery in the energy sector. While Texas is likely to return to its long-term pace of growth this year, the authors write, a significant change in oil prices or further weaknesses in manufacturing remain risks to the outlook.
A new feature, “Go Figure,” debuting in Southwest Economy this quarter offers a graphic visualization of how Mexico’s openness to trade makes the peso vulnerable. This issue also includes an “On the Record” conversation with Fred P. Hochberg, who just concluded an eight-year tenure as the chairman and president of the Export-Import Bank of the United States, and a “Spotlight” on the impact of anti-money-laundering measures on global banks in Mexico.
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Media contact:
James Hoard
Federal Reserve Bank of Dallas
Phone: (214) 922-5307
E-mail: james.hoard@dal.frb.org