Many thanks to Chris Tomlinson of the Houston Chronicle, who quoted me in his recent commentary: "How to Spot a Real Estate Bubble, or Why I'm Comfortable Buying". Chris raised the issue of whether we are currently experiencing a speculative real estate bubble. My own personal definition of Bubble Craziness is the appearance of "funny money" in real estate loans. You know what I mean -- those too-good-to-be-true loan terms that encourage folks to purchase more than they can really afford. These loan products are a real harbinger of a hyper-inflated market, but we don't have them right now. Currently, Houston is experiencing a true sellers’ market, where there is not enough inventory to satisfy demand. But so far we have avoided the worst abuses of a bubble market.
I met Chris at the recent lecture by economist Robert Gilmer from the Institute of Regional Forecasting at the Bauer School of Business, University of Houston. Dr. Gilmer (always one of my favorite speakers) reports that there are four main driving engines of the Houston economy - petrochemicals, medicine, shipping, and the space industry. Right now, our economy is hitting on all four cylinders. The resulting labor market is adding 10,000 jobs to our city every month.
And they all have to live somewhere... which takes us back to that tight housing market. We need every one of the new homes currently under construction, because it looks like housing is going to be scarce for quite a while. And as a city, we need to consider the effect of all this growth on the rest of our infrastructure. In other words, if you think our traffic congestion is getting worse - you're right! Remember that out-of-control growth is a classic definition of cancer. So avoiding a potential real estate bubble is only the first hurdle Houston must overcome in the coming years.