By David S. Jones, senior editor, Real Estate Center at Texas A&M University

Release No. 080208 (Feb 2008)

COLLEGE STATION, Tex. – Affordable housing is the state’s ace in the hole in the predicted future high stakes real estate version of Texas hold ‘em. In fact, the state’s leading expert on residential real estate is betting housing affordability will be the “most significant growth stimulant” for Texas over the next 25 years.

“Texas is the most housing affordable, high growth state in the nation,” says Dr. Jim Gaines, research economist for the Real Estate Center at Texas A&M University. “So far, skyrocketing home prices common to fast growing states like California and Florida have not occurred in Texas.”

In mid 2007, the state’s median priced home was $151,000 – some two‐thirds the national median of $229,000 and about 75 percent less than California’s $589,000. According to the Texas Housing Affordability Index compiled by Gaines, a Texas family earning the statewide median income has 152 percent of the income required to qualify for financing on the median priced home. Nationally, families have about 16 percent more than is required.

Other measures show just how affordable Texas homes are. One expresses median house value as a multiple of median housing income. The lower the multiple, the more affordable the housing. “In 2005, the national median home value was 3.62 times the median household income,” says Gaines. “In Texas, the median value was only 2.52. Current median prices to median household income multiplies are even higher, and the difference between Texas and the nation are even more pronounced.”

Gaines says the real estate game is changing, and the stakes are getting higher. “Things will change dramatically from what many Texas are used to,” he predicts. Population will be a key player at the table as Texas is projected to grow by 13.6 million by 2030. “That’s the equivalent of adding another Dallas Fort Worth metropolitan area, another Houston metropolitan area, another San Antonio metropolitan area and another Corpus Christi,” he says.

“Growth and prosperity will spread throughout the state, but most of the growth will occur in the state’s urban areas,” says Gaines. “Four out of every five Texans will live in the Dallas Fort Worth to Houston to San Antonio triangle.”

New Texans will bring new jobs. “Texas leads the nation in job creation. If Texas maintains its average employment to population ratio as expected during the next 25 years, the state will add another 4.5 to 5.8 million jobs,” says Gaines. “Job growth is expected to be stimulated by overall U.S. economic growth and enhanced by Texas’

employment friendly characteristics.”

More people and more jobs will lead to higher personal income. “Extending the long‐term trend that began in 1969 suggests the state’s total personal income could increase by $1 trillion by 2030,” says Gaines. “The 2005 Texas median household income of $42,139 could reach nearly $68,000 by 2030.”

With the gains will come pains, says the noted economist.

“The projected population and employment boom will also strain local and state resources to provide public services and infrastructure,” he said. “Texas will experience the same growing pains as other high growth states. State and local fiscal capacities will be stretched, and Texans will debate the level and type of growth they want in their communities.”