Effects on Real Estate in Texas and The Woodlands

September 2005

By Cam Collins, MBA, CPM, RPA, ABR

Of course no one is sure how the Katrina disaster will affect local and Texas real estate. Here are some factoids, and then a couple of suggestions. This will be short!

1. The rental market, which has been soft for months, will reach equilibruim quickly. After this initial rush of demand for short term rentals, we will return to a normal rental market where clean rentals take 20 to 30 days to rent, and leases get full price. Rents will NOT rise quickly however, as some may think...there are too many investors in the market with low interest ARM loans who can take less on the rent than in the past. But at least we will get the places rented.

2. A debate has already begun regarding direction of interest rates.
   a. Before the storm, all but one (Boston) of the 12 regions reported brisk economic growth in the Beige Book, released yesterday. No question, the concensus before the storm was for continued economic tightening, ie increases in rates this fall.
   b. Oil prices however are seen as a potential damper on the economy, which would presumably keep rates in check.
   c. The Congressional Budget Office has already estimated the storm will cost 400,000 jobs and reduce growth in the 3rd and 4th quarters by .5% to 1.0%.

3. There will be a construction materials shortage on the Gulf Coast. The last time we had a sheetrock shortage in Houston, about 7 years ago, new home prices went up, as did re-sale prices. Equilibruim was reached rather quickly, however...it was not a long term phenomenon.

BOTTOM LINE....look for
   a. good rents if you are a landlord
   b. continued good investment opportunity. Experienced investors will still have plenty of cheap money with the ARM loans they have been generating, through the 4th quarter.
   c. re-sale prices to move upward, but NOT UNTIL the 4th quarter at the earliest.

Of course, we have been doing re-sales, mortgages (including refinance) and new homes for years. Call or click me for a no-spin analysis of your situation. 25 years experience!

Cam Collins is co-owner of Realty Executives the Woodlands and coordinator of the SuperStar Real Estate program at Montgomery College. He is also a mortgage broker with Southern Home Mortgage.
E-mail cam_collins@topproducer.com or tkloos@rexecutives.com.