The Opening Volley

So here we are in the 4th quarter of 2007 and we've had quite a bumpy ride. As is typical the Real Estate Market is slower to respond (compared to stocks or money markets) and is lagging behind in recovery. Many consumers are still looking for answers and direction; they want to know if it's safe yet.

Just the Facts Man
How long will the downturn last? Is 'recession' really being pronounced by the pundits? Do I have to worry? We are all asking this question of each other; our colleagues, our friends, ourselves. Let's remind ourselves of some facts that at first appear to be painfully obvious;

1. Markets are cyclical; they have to have ups and downs to generate energy to create long-term growth.
2. News often becomes a self-fulfilling prophecy.
3. External factors weigh heavily on even seemingly unrelated items.

But What Does It Mean?
The Wall Street economists are all using words like "recession" and "down-turn" etc to describe their rather grim vision of the future. Other experts are saying just the opposite. Dave Johnson, a stockbroker and analyst in Dallas Texas says "Don't listen to Wall Street economists". Citing Dr. David Kelly, an economist in Boston: They're all worried about losing their jobs, they're worried about losing their year end bonuses. They're out of touch. Looking at the classic signs, employment, market valuation, the market is not in such bad shape. In fact he reminded us there have been 10 recessions in 60 years and market went up in 6 out of 10 or those 'recessions'.

The market needs corrections. People need to call them something. Many econimists warn that a cyclical Bear market is the only way to remove incorrectly indexed markets and avoid inflation and recessions. Many pundits have stated we've not had a true bear market in a number of years and this is the healthiest thing to happen right now.

What it Means to Houston
The most important thing to remember is lending is a national practice, real estate (and most other activities) are local. Simply put, you don't often buy a car from Tulsa OK if you live in Houston TX. The same is true especially for houses; you buy a house locally. Most people go to work for a company that has a local presence. Loans are regulated by Federal overseers. This means one decision will effect the entire country. Not so with most other elements. As lenders see the error of their ways in lending practices that are unsound and return to investing intelligently in qualified borrowers instead of profit-lusting we'll see a very quick return to stability.

Houston is special because the 3 major elements of our local economy are strong not just locally but bouyed from national and international sources; hydro-carbons are significant to the entire world AND Houston, MD Anderson and Texas Children's Hospital (not to mention Baylor College of Medicine) are international destinations for specialized healthcare, education is the 2nd largest employer in the Houston Metro area drawing in new residents to our city from all over.

Playing Pundit
In my current evaluation we're really well poised for the continued growth that Houston has always expected. Number one in New Home Starts, Prime Destination for retirees, one of the fastest growing cities, good employment numbers; all these point to sustained healthy growth over the long term. I don't think we've hit rock bottom yet; there are some lower prices for homes in the future, longer time for homes to spend on the market waiting for sale and increased inventory. I think we'll see the bottom of that by 1st quarter of 2008 and a distinct recovery by the second quarter. That means buy now and sell later; buyer's market y'all! But that does not mean everything is at fire-sale prices. In fact, since Houstonians are famously frugal there was never a true housing bubble so our correction will be very slight compared to many other places in the nation.