Real Estate Center Predicts Bright Texas Outlook > Texas Gulf Coast Real Estate

From the New York Times

The real estate market these days is a tale of two Americas, and one of them is not doing too badly.

In the America of big-city housing markets, especially on the east/west coasts and in the struggling industrial Midwest, the huge run-up in values in recent years has given way to big drops in prices and sales volume. Millions of people owe more than their houses are worth.

But in the other America, places like Texas and the Texas Gulf Coast, the available evidence suggests the real estate market is holding up.

Prices there never boomed as crazily as they did in the big cities, and now, even though volume is down almost everywhere, prices in many of these towns are firm or rising.

The Wall Street Journal Reports - affluent retirees are transforming rural communities.

Affluent retirees are descending on remote areas and creating demand for amenities like interior-design stores, spas, and organic markets. For many of the communities, this is the biggest change since the interstate highway system was built in the 1960s.

What’s driving the transformation is a shift in the nature of the economy – thanks to the computer, many good jobs can be done anywhere, says Peter Nelson, an associate professor of geography at Middlebury College and an expert on rural migration.

The impact of rural gentrification drives up the price of property and the influx of money creates new jobs in lodging, restaurants, and other service industries. "What we’re seeing is a class colonization," says Nelson.

One indicator of rural gentrification is an increase in residents’ total dividend, interest and rent income. That measurement, tracked by the Commerce Department, is a sign that new residents – usually retirees – are living off their investments rather than salaries.

For instance, in Teton County, Wyo., home of Jackson Hole Mountain Resort, total dividend, interest, and rental income has risen 177 percent between 1996 and 2005, one of the largest increases in rural America.

Locally, the rural Bolivar Peninsula coastal area has seen vacation home rental incomes rise dramatically over the past several years.

"We now have many homes with rental incomes that exceed 50,000 a year" - says Anne Willis of Swedes Real Estate - who manages over 300 properties on the Peninsula.

Condo boom on Texas coast defies national downturn Luxury towers adding new dimension to coastal skylines

By Carrie Alexander SPECIAL TO THE AMERICAN-STATESMAN

Condominium developers along the Texas Gulf Coast are doing something strange these days: They're continuing to build.

As a housing slump grips much of the nation, beachfront development in long-hot locales such as Florida and California has ground nearly to a halt. But the real estate market on the Texas coast — and specifically, the condo market — has managed to stay strong.

"We did feel the downturn, but not the devastation some markets have had," says Alice Donahue, a real estate broker who operates TexasGulfCoastOnline.com, a site that tracks real estate trends in the area.

Jim Gaines, a research economist at the Real Estate Center at Texas A&M University, says that while the national credit crunch has had an impact on the Texas Gulf Coast condo market, most developers "still feel things are pretty good."

"I think for the future (of the condo market), the coast still gets an excellent grade," Gaines says. "The development potential is still very, very high."

Despite national housing concerns, "I feel highly confident in the Texas market, and the Galveston market, for high-rise condos," says Richard G. Anderson, vice president of development for the Falcon Group of Houston, which is developing the $170 million Palisade Palms condo project in Galveston. "Texas, by and large, wasn't able to take advantage of the go-go days of 2004 and 2005, but at the same time, the oversupply didn't hit us like it did in Las Vegas, Florida and San Diego. Texas is fortunate enough that right now we seem to be insulated from a lot of that."

Here is a look at some of the condo developments that are either in the planning stages or are recent additions to the Texas Gulf Coast.

Palisade Palms

At the north end of the Texas coast, a giant condo project has sprung up to dominate the beach-front skyline.

With its twin 27-floor towers, the luxurious Palisade Palms development casts a long shadow over Galveston Beach. The project, developed by the Falcon Group of Houston, began construction in late 2005, and the first residents are scheduled to begin moving in this spring.

Together, the two towers have 288 suites, and about 250 of those have already been sold, says Anderson. The residences will have the amenities of a resort — multiple pools and spa areas, on-site cafes and restaurants and balconies in each unit.

Anderson says the initial two-tower project is just the first step in what could be a four-phase development. "We have enough land to build $750 million worth of project," says Anderson, who has taken the unusual step of being both developer and customer. He has purchased two of the Palisade Palms units himself.

Anderson said the story of a California buyer illustrates what's attractive about the Texas Gulf Coast market for condos. "She lived in San Diego and told us she was planning to make this unit her permanent home. I was wondering, why would you move, as a primary home, from San Diego to go to Galveston?" Anderson said. "So we asked, and she said ... she could sell her house in San Diego and she could buy in Galveston and still have $1 million in her checking account."

Maravilla del Mar

Construction hasn't even started, but the Maravilla del Mar condo project on Mustang Island near Port Aransas is already one of the most talked-about developments along the Texas coast these days, simply because of its size.

The plans call for a huge, 500-unit complex of luxury condominiums in three towers, with the tallest tower about 35 stories, says project engineer David Underbrink, who is president of Naismith Engineering Inc. The Maravilla del Mar, planned to occupy 23 acres near Mustang Island State Park, is being developed by Mustang Island Investment LLC, a group of Wisconsin investors.

"There's nothing as big as this project in this area of the world. You have to go to San Antonio or Houston to find another one like it," says Underbrink, who estimated the project at $325 million. He said the project is about a year from construction.

The Maravilla del Mar plans call for a light, airy beach-town look with the amenities of a five-star resort. Underbrink says he's not sure the Corpus Christi-Port Aransas area will ever see another development of its magnitude.

"I'm not sure that there would be another of this scale allowed in this area, with the regulations that are in place," Underbrink says. "It might be a one-time-only project. There could be others something like it, but not nearly as tall."

The Sapphire

At the south end of the Texas coast, on South Padre Island, yet another high-rise project is drawing attention. The Sapphire South Padre, a 31-story, twin-tower project with about 220 luxury units, is due to complete construction this summer. Dubbed "The Crown Jewel of South Padre" by its developers, Randall Davis Co. of Houston, the project will be the tallest structure on South Padre. The development's two towers are connected for the first 19 floors, then divide into separate spires.

The Sapphire's focus will be on high-end, resort-style living with concierge service, pools and a private, on-site movie theater. The development is expected to be ready no later than December.

The Sapphire is designed by Ziegler Cooper Architects of Houston, which designed the Austonian condo tower currently under construction in downtown Austin. R. Scott Ziegler, one of the founding principals of the architectural firm, says the narrow nature of the island presented an opportunity to build with an unusual feature — waterfront views from both sides. "You get fantastic east views of the Gulf, and the west views are of the back bay," Ziegler says.

Ziegler said that the Sapphire is built to take advantage of the setting on Texas' southern Gulf Coast. "South Padre Island is a lot more precious part of our coast than other areas, such as Galveston might be, as far as raw natural beauty," he said.

TEXAS HOUSING MARKET ISOLATED, NOT IMMUNE

While Texas is somewhat isolated from the storms in the national housing market, it is not completely immune, said Real Estate Center Chief Economist Dr. Mark Dotzour during a series of speaking engagements yesterday in the nation’s capital.
“The difficulties in the mortgage market are impacting buyers in all 50 states, including Texas,” said Dotzour, speaking at the Economic Policy Conference of the National Association of Business Economics. The economist was serving on a panel discussing the regional differences in the housing markets across the country.
Dotzour noted that home prices are still increasing in most Texas metro areas, foreclosure rates are much lower than the national trends, and the inventory of unsold homes in Texas is currently at 5.7 months, well below the national average of 10.1 months. However, he also noted that the most recent numbers from the Office of Federal Housing Enterprise Oversight show the rate of price increases in most Texas metros to be getting smaller.

Earlier that day, when asked by Bloomberg’s Kathleen Hays about the efficacy of further rate cuts by the Federal Reserve, Dotzour stated that he "wasn't a big fan of government intervention, but since they are going to intervene in a big way they should do something that might actually help solve the problem."

Dotzour said that the recent "helicopter drop" of $150 billion would not help the housing situation and would only exacerbate inflation.

"If they really want to help solve the housing problem more quickly, we need to see a tax credit for people to buy a home,” he said. “We've got excess inventory that needs to be soaked up."

Dotzour also noted that the ten-year treasury rate is moving back down to the 3.5 percent range because of the continued fear of the credit markets. When the rate gets near 3.5 percent, a short window of opportunity opens for existing homeowners to refinance their homes.

"I thought that window had closed a few weeks ago as the ten-year moved back toward 4 percent,” Dotzour said. “But news of continued difficulties in the banking system has caused the rate to move lower again."

About 141,000 people moved to Texas from other states last year, giving the Lone Star State the highest domestic migration figures of all fifty states.

North Carolina, Georgia and Arizona rounded out the top four, according to U.S. Census Bureau figures reported by the Western Blue Chip Economic Forecast.

The Western Blue Chip Economic Forecast is published by the JPMorgan Chase Economic Outlook Center, an affiliate of the L. William Seidman Research Institute, College of Business, Arizona State University.

I would imagine that many more people will be moving to Texas with the refinery projects in Port Arthur creating so many jobs.