Home markets better in Texas
(Austin) Texas is fairing better than the rest of the country when it comes to home prices and foreclosure rates, according to testimony offered at Wednesday's Senate Intergovernmental Relations Committee. While other states, like California, have seen as much as a 25 percent decrease in home values since the collapse of the housing bubble, witnesses testified that though Texas is not immune, certain factors have contributed to a stronger market in the state. "Relatively speaking, Texas has been doing very, very well, compared to many of the other big states, and particularly to the national level," testified Dr. Jim Gaines, a research economist at Texas A&M's Real Estate Center.
According to Gaines, the number of foreclosure filings in Texas has actually decreased since mid-2007, and ranks 24th among states in terms of total foreclosures. Gaines said that latter number is a little misleading, as Texas runs higher in total foreclosures even in good years. He compared the state's rate of homes facing foreclosure action, about one percent of mortgaged homes, with other states, like California and Nevada, where foreclosure rates are running at around 4 percent. The foreclosure rate for subprime mortgages in Texas, said Gaines, is about 6 percent, half of the national rate.
Gaines identified a number of reasons why the housing market in Texas is performing relatively well. He said Texas did not have the over inflation of housing prices seen in other states during the housing bubble, so the value readjustment has been less severe. For example, while Texas was only one of six states to see a slight increase in home values last year, states like California have seen a 25 percent drop in values. Additionally, Texas lenders tended to stay away from more exotic loans, like interest-only payment loans.
For the near future, Gaines forecast a continuing decrease in subprime mortgage foreclosures, as these loans are refinanced, renegotiated, or foreclosed. He did warn of a bump in prime adjustable rate mortgages made in and around 2005. While these loans were originally financed at low interest rates, in the third year, typically, these loans could bump up to 8 to 9 percent, adding hundreds of dollars to monthly mortgage bills. For the long term, he added, only by ensuring a strong economy in Texas can lawmakers keep the housing market in Texas relatively strong. Beyond that, said Gaines, the state and nation will have to wait for stability to return to the global economy to fully fix the housing problem.
The Senate will reconvene Monday, March 2 at 1:30 pm.