While Texas has so far escaped the worst ravages of the housing bust, the state won’t be totally unscathed by mortgage problems and overbuilding, a top economist warns.

David Seiders, chief economist with the National Association of Home Builders, said the housing downturn “has made its way to Texas.”

“The same pattern is developing as in the U.S. housing market – but later and not as severe,” Mr. Seiders told builders meeting in Grapevine on Friday for the Sunbelt Builders Show.

But while Texas is being affected by home foreclosures and a slowing national economy, he said, “I believe the Texas economy and housing market will be doing relatively well compared to the U.S. totals.”

Recent stability of overall housing prices in Dallas and other Texas cities is a contrast to the nationwide picture, where residential values are falling.

“House prices in this area seem to be holding,” Mr. Seiders said. “You didn’t have the explosion in prices on the way up” that many cities saw.

And Texas may fare better in the subprime mortgage shakeout.

“As long as price appreciation continues at some pace, most of those should be able to refinance into something more manageable,” Mr. Seiders said. “That’s not the case in a lot of markets.”

Nationwide, homebuilding is in a sharp decline. In August, home starts fell to their lowest point in seven years.

Mr. Seiders is warning builders not to look for a quick rebound.

“I’m calling for a bottom to sales activity in the first quarter, and a bottom to starts in the third quarter,” he said.

The current housing downturn is shaping up as one of the worst, Mr. Seiders said.

“It makes the early ’90s recession look pretty small by comparison,” he said. “We do have some further distance to go down.”

Most current housing forecasts assume that there won’t be a national recession.

“I don’t have a recession in our national economic forecast – I’m counting on the Federal Reserve to continue to manage monetary policy to keep us out of recession,” Mr. Seiders said.

“The most important thing for how the Texas economy and housing market does is the national economy and global economy. Everything is wrapped together.”

The mortgage market also needs to stabilize if housing is to uptick, he said. Currently it’s hard to gauge the risk in home lending, he added.

“Investors around the world with U.S. mortgage-backed securities really don’t know what they have,” Mr. Seiders said.

Jack Haynes, executive vice president with Countrywide Home Loans, said lenders are having a hard time interesting investors in purchasing the mortgages they make.

“Things are stacking up on everybody’s shelf,” Mr. Haynes told builders at the show. “At a certain point that will strangle the mortgage industry if it doesn’t get some relief.”

Source:

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