As usual, the recent symposium by the Institute for Regional Forecasting answered many questions about the Houston economy – and raised others. This was the last lecture by Dr. Ted Jones, the Chief Economist at Stewart Title. Thanks to Dr. Jones for plugging the gap between the exiting director of the IRF, Dr. Barton Smith, and incoming director, Dr. Robert Gilmer from the Federal Reserve.
As before, the economic information is mixed. The Houston economy is doing stunningly well. We are creating jobs at an annual rate of 3.5%, well above the 3% threshold for a recessions and twice that of the US as a whole. Jobs in the Houston Metropolitan Area have now surpassed their previous record, and gains are predicted for next year across all categories, including medicine, oil and gas, petrochemicals, shipping, and construction. And remember, that is before the much-anticipated re-opening of the Panama Canal brings the markets of a second entire hemisphere through our Port of Houston. Houston is, therefore, stronger and better diversified than ever before.
Dr. Jones was quite bullish with regard to Houston real estate as well, citing historically low interest rates and a tightening supply. He stated that real estate currently has “the best return in 12 years.” However, the US as a whole is creating new housing at only half the rate needed to meet predicted population growth, and Dr. Jones predicted that housing and buildable raw land may soon become increasingly pricey.
So the Houston economy is doing fine. The storm clouds on the fiscal horizon come from both national and international problems. Congress has yet to deal with the looming Fiscal Cliff. Which means that businesses and investors cannot make sound decisions because they do not know what their ground rules will be. Dr. Jones also pointed out that over the last thirty-five years, the recovery from each subsequent recession has been weaker and weaker. And he said that Europe has now slipped back into recession.
So once again, my crystal ball is quite cloudy. How the robust Houston economy will respond to national and international forces is still an un-answered question. As for us here in West University Place, I can testify for certain that the inventory of real estate properties is uncomfortably low. Homes are selling at an impressively brisk rate and ignoring the year-end holidays.
So we look forward – cautiously – to next year. We are happy to see Dr. Robert Gilmer taking the helm at the Institute for Regional Forecasting, and look forward to his take on the Houston economy in the spring.
Roger Martin Properties