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5/3/2006 Houston -- While some housing markets around the country should be embracing for a severe slowdown, Houston is expected to escape a direct hit, University of Houston economist Barton Smith said Tuesday.
Houston's affordable housing stock and a regional economy that is reaping the benefits of high energy prices will help cushion the local market, said Smith. With low housing prices and fairly good incomes, housing is remarkably high. Many urban markets especially in the nation's midsection, will avoid most of the direct blow of a national economic slowdown that results from falling home prices in some markets. Strong and diverse job growth has buoyed Houston's housing market.
Some 75,000 new jobs created here last year indicated the local economy was firing on all cylinders, not just energy. However, there is a dark side to the booming market. There are concerns that a raft of subprime mortgages could harm the national and local market.
These loans allow buyers who normally would not qualify for mortgages to purchase homes with higher interest rates. Nationwide, more than 24 percent of mortgages issued last year were subprime.
Many subprime borrowers don't have quickly growing incomes, so when their mortgage payments adjust upward, they can have a hard time paying their notes. The issue is already starting to come to light. Local foreclosures are three times higher than they were just three years ago. But they are still just a fraction of what they were in the late 1980s after the real estate boom.
"We have an irrational goal that we need to get every American in to their home", says Jacobson. Low interest rates helped drive up home prices in some of the country's hottest markets, like California, and on the East Coast, where prices rose much faster than income. Foreclosures are less common in these areas because homeowners unable to make their mortgage payments can often sell their homes for more than what they owe for them.
But in Houston, price appreciation comes much more slowly. Last year, home appreciated 3.8 percent, up from less than 1 percent a year before.
(contributed by Nancy Sarnoff)
