In the past five years, the population of Texas grew 10 percent, three million people - more than Florida or California. Part of the increase was immigration, legal and illegal, but a larger part was people moving there from other states.
When people move anywhere, they themselves create new jobs - in stores and restaurants, and in construction. That's the base of the economy in Florida, which lives off retirement income. But unless work is available in anchor industries, this job creation can't last long. In Texas, two thirds of new jobs in the last few years were in healthcare, computer expertise, and the energy business - the types of industries that will continue to grow. In other words, we can expect future demand for housing to be strong.
That said, Texas is a big place, so some markets will do better than others. Houston and smaller markets with a large energy-related sector - Odessa, Beaumont, Midland - are strongly affected by the current low price of energy. The winding down of shale oil and gas development in Odessa and Midland puts those markets off-limits for normal real estate investment for a while. The refinery business in Beaumont and Houston, and the energy-technology business in Houston are more cyclical, so slack demand right now can be an opportunity for investment in future demand - but with the knowledge that success can be years away.
Local Market Monitor, Inc.
Texas - 2017
The college towns - Waco, College Station, Lubbock - provide a steady renter population, but it's best to invest in properties aimed at staff and faculty. The home-price/rent ratio in these markets is very favorable, but be aware that they're not high-growth opportunities.
Growth in San Antonio is linked to tourism and therefore to lower-paid jobs that create more demand for rentals. Tourism will do well, both because more Americans take vacations and because more of them stay in the US.
Dallas-Fort Worth has the steadiest growth in the state because it provides many of the financial and business services that other markets need. Recent job growth has stayed high even as other markets have cooled off a bit. Pretty much any kind of real estate investment can be successful here - renters are half the population and many jobs are in the higher-paid finance, consulting and computer industries.
State government in Austin, including the staff of the state university, provides a large population of potential renters with moderate income, especially as home prices increased 30 percent over the last three years. The growing computer industry provides higher-paying jobs. Austin had the fastest population growth of the big Texas markets over the last five years, so demand outstripped the pace of home building. This creates a dilemma for investors - on the one hand, home prices will keep rising...for a while - on the other hand, with job growth slowing there will eventually be too much building. Different investments do best at different stages of the demand cycle. Right now you don't want to flip homes in Austin, you can't buy bargains. You CAN invest in rentals - single-family and apartments - but you need to make sure you don't overpay; do not expect prices and rents to increase as they have the last few years.
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