Mays Business Online

Mortgage foreclosures hit an all time high!
Lending institutions in trouble!
Housing market downturn leads U.S. economic recession!

National headlines like these have got Americans concerned, but the researchers at the Texas Real Estate Center say not to worry: the Texas real estate market is doing just fine.

Real Estate Center research economist James Gaines is projecting an economic boom for Texas.

“Some of the crazy things happening other places in the country, like California, just aren’t happening here,” says James Gaines, research economist for the center. In fact, after reviewing statistical models and projections, Gaines says Texas should be preparing for an economic explosion, not a recession.

“I’m projecting a boom for Texas in the next 25 years,” said Gaines, who cited information from the state demographer’s office that shows a significant increase in the population of Texas for that period. Gaines says in the next quarter century, “we’re going to add the equivalent population base of another metropolitan Dallas-Fort Worth, another metropolitan Houston, another metropolitan San Antonio, and enough left over for another Corpus Christi. That’s 14 million people,” or, more than half of the state’s current population of 23.5 million.

What is salient about this increase from Gaines perspective is that all of these people will need places to live, as well as places to shop, go to school, and work—all of which will have a huge impact on the residential and commercial real estate market.

“We won’t be the fastest growing state in terms of percentage, because we’re already so big…but we will be the fastest growing state in terms of numbers of people,” said Gaines. “Actually, we are already.”

Ready to answer the needs of those millions in the real estate industry or affected by it (which is, everyone in Texas), is the Real Estate Center at Mays Business School at Texas A&M University.

“Solutions through research”

Created by an act of the state legislature in 1971, the center’s purpose is to help Texans make informed decisions about real estate. The center accomplishes this goal through their two emphases: research and communication.

“All of our research is academic quality. We do it to the most rigorous academic standards, but we write it in such a way that the industry can apply it,” says Gary Maler, director of the center. “The industry isn’t as interested in theoretical research as they are in applied research. They want to know about what is affecting them today, and what the market Is going to look like tomorrow.”

Maler and his team rely heavily on the Internet to get their research in the public eye. Their website (http://recenter.tamu.edu) is updated with news and numbers from around the state on a daily basis, and was visited by more than two million people in 2007 alone. Their twice weekly e-newsletter, RECON, is received by 30,000 people worldwide.

They also use more old-fashioned methods of communication: their quarterly print publication, Tierra Grande magazine, has a readership of more than 147,000, and has won many awards for its quality. Maler says their staff of researchers breaks away from the mold of most academics, as they occasionally are published in refereed journals, but that isn’t their main focus. Instead they strive to get noticed in publications that ordinary people are reading, such as newspapers and trade magazines.

And their research is getting noticed, thanks in part to all the negative media attention about real estate elsewhere in the nation. Center economists have been quoted recently in The Wall Street Journal and the Chicago Tribune, as well as on high-profile websites such as Morningstar Mutual Funds, CNNMoney.com, MSNBC.com, and MSN Money. Additionally, the NewsHour with Jim Lehrer on PBS invited Mark Dotzour, the center’s chief economist, to join a panel from around the country for a segment on regional housing markets.

“We reached the potential of 151 million households this past year,” said Maler, combining the circulation of all of the publications in which the center’s research was featured.

Maler and his staff also spend a lot of time on the road, presenting their research to groups involved in many areas of real estate, such as financers, developers, and brokers. Maler says not only does this get their message to influential people in the industry, it also helps direct their future research.

“When we’re out speaking to industry groups, we interface with thousands of people every year. We’re constantly asking ‘what’s on your mind?’…that way we make sure our research is in tune with the heartbeat of the industry and the people of the state of Texas,” he said.

Big state, little staff

Funding for the staff of 20 researchers and communicators the center employs is provided by the licensing fees of those in the real estate sales industry in the state. This is significant, as even though the center is a part of Texas A&M University, they are not funded through the university budget. They do, however, answer to the university’s board of regents, as well as their own advisory board. Maler says that this relationship is unique among real estate centers, which are often funded by state universities, and therefore have more of an academic focus.

The center employs seven full-time researchers, and Maler says they have enough work to do that they could easily hire two more, if the funds were available. “It’s just amazing what we do, the amount of territory and the broad range of topics we cover with only 20 people,” he said, noting the different areas of specialty of his staff members which range from rural land, to public policy, to commercial and residential trends.

Maler says part of what makes the center’s research so valuable is the entities that are using it. “The center’s reputation has grown enormously over the years…I’m sure there are hundreds if not thousands of companies that use our information and we don’t even know about it,” he said, mentioning that Taco Bell is among their constituents, as the fast food chain uses information on the center’s website to determine locations for new stores. The center does not, however, do research specifically for corporate clients, as that would skew their objectivity, a trait that Gaines says they “guard jealously.”

One useful bit of research the center is working on currently is energy ratings for houses. Just like an efficiency rating for an appliance or automobile, the center’s staff is researching the viability of such rankings for homes and how it might impact the real estate industry.

Also of interest to average homeowners is the fact that government agencies such as HUD (U.S. Housing and Urban Development) and FHA (the Federal Housing Administration) use information from the center to determine loan limits. “That frees up a lot more money for people to buy homes in Texas,” said Maler.

Maler says that currently, the center is conducting comparative research to see how cities in Texas measure against cities of similar size in other states. They are looking at cost of living, average income, and cost of median housing for cities such as Dallas and Philadelphia. “That’s what people need to know, “ said Maler. “How does Texas stack up with these other places?”

Gaines continued this thought. “Affordable housing is, I think, going to be one of the most critical issues of the next decade. It’s one of the reasons why we’re predicting a boom for Texas,” he said. “Texas is a very affordable housing state. The price of housing is two-thirds the national median home price, and it’s only 25 percent of the cost of housing in California….and the income differentials between the places are not that big.”

Gaines says that Texas’s four major urban markets, proximity to Mexico, and highly affordable cost of living make it part of the final frontier for high growth states that people are flocking to. In essence, the center’s research shows that the future looks very bright for the economy of the Lone Star state.