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by G. Steven Bray
Corelogic released a report last week identifying 14 metros that, in its opinion, are overvalued, and low and behold, 5 of those 14 are in TX. Corelogic defines overvalued markets as those in which prices have increased above the sustainable level based on the metro’s per capita income.
The Austin metro led the pack with prices 42% higher than the sustainable level. The Houston area came in second at 25% overvalued. The Dallas metro came in eighth, San Antonio placed ninth, and Ft. Worth was 12th.
Corelogic claims that the oil and gas boom is responsible for the population and job growth that has pushed up prices and that the current lower oil prices will lead to a bust.
James Gaines at the Texas A&M Real Estate Center disagrees. He acknowledges that home prices in these metros have risen at almost twice their normal rate for the past few years, and he credits the oil and gas boom for some of that increase. However, he notes that supply and demand are very unbalanced at this time with most metros at 3 or fewer months of housing inventory for sale. If demand does fall, these markets have a lot of room to absorb it before they become buyer-dominated.
A further point is that job growth in most TX metros, especially Austin and the DFW area, has been more diversified than in previous oil and gas booms. Tech, telecomm, and health sciences, which have fueled a lot of recent job growth, are unlikely to suffer from declining oil prices.
So, Gaines says, “Bottom line, we don’t think there is really a bubble.”