July 2018

In 2002, the Real Estate Center embarked on the challenge of dividing roughly 268,600 square miles of varying Texas landscapes into distinct regions, each with a unique set of soil and land-use types. The result? More accurate reporting of land market trends.

“Houston Strong” was coined in 2017 when the Astros gave its Harvey-ravaged hometown a much-needed World Series win, but the mantra resonates well beyond baseball. Houston has been proving itself economically strong against one storm after another for at least 35 years.

Homeownership has always been part of the American Dream, but rising home prices and lagging income growth are putting it out of reach for many lower-income buyers. That’s all true even in Texas, where home prices are still generally affordable compared with the rest of the nation.

For the past six years, new-home inventories in Texas have been well below what’s considered a balanced market, and there is no easy fix. A myriad of factors—including rising land prices and supply costs, sluggish labor productivity, and new building and financial regulations—are making it difficult for builders to keep up with increasing demand.

Texas land prices are on the rise. While that’s good news for landowners looking to sell to residential developers, it’s a different story for potential new-home buyers who are seeing higher land costs reflected in higher home prices.

Riddle me this: What happens to housing affordability when people move by the thousands to Dallas, a city with an already low housing inventory and rising land and construction costs? The answer is a lesson in basic economics.