"Houston has become the subject of controversy for not joining in the national misery-loves-company party. Local and national media alike have chimed in on Houston's failure to slide into the national housing abyss. ... Houstonians missed out on the boom years of 20 percent annual home value increases seen in some areas of the nation; so now we are missing out on the years of 20 percent annual value decreases. ... Houston has frequently been critcized as an out-of-control, unregulated and sprawl-crazed city But it is exactly that lack of governmental interference that allowed natural market forces to self-regulate Houston's housing supply to match demand. ... This increased supply prevented home sellers from being able to ratchet up home prices. ... Today's hardest hit bust markets are, not coincidentally, the same cities with the greatest municipal and county regulation. ... You may ask: What about the subprime thing? Well, it is all one and the same. What allowed mortgages to be made to unqualified buyers with no down payment in the first place was the perception that home prices would continue to go up and therefore the mortgages would be safe. ... Houston's supply-rich environment has made it one of the nation's few 'cost-plus' new home markets. What that means is that Houston homebuilders price their homes based on current cost of construction, not from a 'what-the-market-will-bear' strategy. ... So what is the moral to this story? ... Houston and surrounding municipalities have done us all a big favor by doing what they do best--delivering high quality governmental services and not trying to be the OPEC of Houston", my emphasis, Will Holder (WH) at the Houston Chronicle, 29 June 2008.
"To find a hot spot where soaring oil and commodity prices, and the booming economies of the developing world, are keeping cash registers ringing and construction crews fully employed, you don't need to trek to Dubai or Moscow. You need only travel as far as Houston. ... Instead, Houston is experiencing a 21st-century boom fueled by a weak dollar and global growth. 'Three things affect Houston's economy,' says Patrick Jankowski, vice president of research at the Greater Houston Partnership: 'The price of energy, the value of the dollar and the strength of the U.S. economy at lage.' ... Exports are rising because Houston has become a sort of Silicon Valley for the global oil industry. ... In 1981, the oil and gas industry was a domestic, blue-collar one. Today it's an international, white-collar one. ... Houston has 70,000 engineers and architects (a concentration 60 percent higher than is typical for the United States). The oil boom and weak dollar are boosting demand for their services, and engineering and construction firms like KBR and Fluor are applying their expertise to power plants and sewage facilities around the world. ... With the mercury hitting 95 in the morning, the people in Houston might be overheating (climate change here means cranking up the air conditioning), but the real-estate market never did. ... The residential market, which avoided a bubbly run-up--thanks to endless supplies of land and a lack of zoning laws--has remained bouyant. Development is rampant, from $200,000 single-family homes in suburban planned communities to $1.4 million town houses that have replaced student apartment buildings near Rice University", Daniel Gross (DG) at Newsweek, 30 June 2008.
When I saw banks make 100% mortgages, I saw the housing bubble was ending. How? In 1988 Japanese banks lent 110%, yes, 110% on commerical real estate (RE). Their theory; since RE in Japan goes up 20% a year, the worst that could happen is: foreclose, wait six months, then sell. As Uncle Miltie wryly noted, why do we need the Fed to regulate the money stock? We don't need federal price controls in other markets. WH's article is at: http://www.chron.com/disp/story.mpl/editorial/outlook/5861776.html.
Connie Yu, are you listening, come home. All's forgiven.
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