Once again I invoke the TINSTAANREM clause — There Is No Such Thing As A National Real Estate Market. Each real estate market is different. Ditto the economy. And proving that clause today is Corpus Christi, Texas. Yesterday I had the opportunity to speak in Corpus Christi, Texas, to a group of lenders, builders, developers, investors, Realtors® and community leaders.
The topic was the dynamic change that has taken place in the Corpus Christi economy and real estate market. The impact of the development of the Eagle Ford Shale Formation for oil and gas, along with an expanding petrochemical industry based on cheap and abundant natural gas feed stocks, plus a recovering U.S. economy benefitting tourism and the hospitality industry, all have combined to boom the Corpus Christi economy. And this isn’t just a flash in the pan, so-to-speak, but rather a long-term formation of well paying blue- and white-collar jobs.
In the past 12 months, Corpus Christi (CC) added 7,700 net new additional jobs—a 4.1 percent gain. Wow. CC now has more jobs than any time in history. Jobs are everything. Period. The following graph details the erupting job growth taking place in CC.
Naturally, following this expanse in jobs has been a surge in home sales. The following graph shows the 12-month moving average of the number of homes sold per month. Using the 12-month moving average removes the effects of seasonality plus the variability that naturally occurs from month-to-month. In a growing market, this 12-month moving average mutes the actual gain since the prior 11 months buffer the increase. [Just as the 12-month moving average buffers the actual decline in a falling market.]
Unlike the U.S., Texas did not participate much in the housing bubble as far as price was considered. While there was a substantial increase in home sales in Texas and CC due to subprime lending, buyers remained pretty sane with respect to price. [I believe that the housing bust experienced in the late 1980s inoculated people against riding that bubble again as they already knew of the economic suffering that would follow.] Home prices in CC, as shown in the following graph, remained relatively static – and these data are raw – not adjusted or averaged.
Wherever the number of home sales goes, prices follow in the next 12 to 24 months. That is evident in the latest 12-month moving average of median prices in CC. The 12-month moving average median home price is up 5.39 percent from the same period one year earlier. Given the significant increase in jobs, it would not surprise me at all to see an 8 to 10 percent home price increase take place in the coming 12 months in CC. By the way, CC median home prices today are at an all-time high, but still more affordable than the U.S. according to the Real Estate Center at Texas A&M University.
While new home and apartment construction are increasing, they are falling very short of the increased demand for housing in CC. In 2012, a total of 1,176 new dwelling permits were issued in the CC MSA (986 single family dwellings and 190 multifamily units). Given the 7,700 net new additional jobs, 6.55 net new jobs were added for each new dwelling unit. Most economists think that 1.25 to 1.5 new jobs are required for additional dwelling unit. That means that CC is falling far short (read that as multiples) of the increased demand for housing. Rents and home prices will escalate sharply in 2013. There was 5.8 months of inventory of homes available for sale in February 2013 in CC, while six months is considered normal.
And the future? Eagle Ford Shale is multiple decades of economic activity. Ditto the expanding refining and petrochemical sector. The recovering U.S. economy bodes well for the hospitality and tourism industry. And in the longer run, Corpus Christi is natural for retirement housing since the area sports some of the most affordable salt water views with a temperate climate in the entire country having jet service.
Ted