“The dynamic of people leaving the coasts and coming to places like Texas is a durable trend,” said Mark Okada, chief executive officer of Dallas-based Sycamore Tree Capital Partners, which he started last year with Jack Yang and Trey Parker to invest in alternative credit. He points out the state has an optimal tax rate, is a few hours flying distance from both coasts, and is only an hour behind New York.
Real estate agents are trying to keep up. Supply is limited in desirable neighborhoods, and it’s not unusual for houses to attract dozens of bidders—many of them from California. In some cases, buyers are showing up without a job but with plenty of cash after selling their houses in more expensive locales.
The median home price in Texas jumped 14% in March to a record $283,200, spurred by a 29% surge in Austin and double-digit gains in Dallas and Houston, according to Texas A&M University’s Real Estate Research Center.
“It’s the reverse of the way people used to move to California,” said Marie Bailey, who relocated in 2017 to Dallas’s northern suburbs from the Los Angeles area and became a real estate agent. She started a Facebook group three years ago for Californians moving to Texas and recently surpassed 33,500 members.
Booms—and busts—have a long history in Texas. The oil and savings-and-loan industries both flamed out in the 1980s, leaving years of economic wreckage in their wake. These days, the state’s big cities are less dependent on petroleum and natural gas. Houston still feels the pain when energy prices fall, but the city can also fall back on big industries in aerospace and medicine, plus growing clusters in biotech and clean energy.
Property Taxes
The growth comes with headaches. Traffic is getting worse and public transportation is limited. The influx of people is driving up housing prices, forcing up the cost of living by boosting property taxes. Given high levies on real estate and the state sales tax, the fiscal burden on middle-class people is higher in Texas than in California, at least according to the Institute on Taxation and Economic Policy.
What’s more, Texas can be its own worst enemy when it comes to economic development. The state’s independent power grid failed under the strain of unusually cold temperatures in February, stoking doubts about Texas’s views on electricity deregulation and aversion to federal oversight.
And then there are the recent headlines out of Austin, where the state’s Republican-dominated legislature has spent the past few months taking on a raft of controversial measures, including restricting voting and abortion rights, expanding the ability to carry a gun without a permit, and limiting trans-gender kids’ participation in sports. The debates have drawn the ire of the national media, pleasing far-right conservatives and worrying moderates who fear that state’s brand will continue to become a caricature.
“We’re basically doing things that flat offend highly educated workers we need to attract,” said Ray Perryman, a former economist at Baylor University in Waco who has been tracking the Texas economy for 40 years.
Inequality Fears
Perryman said he’s also worried the state isn’t investing enough in health care or education. More than half of its school kids are Hispanic, but Hispanic families only control about 5% of the state’s wealth, he said. Black children make up more than 12% of students, and African-American families are similarly underrepresented in wealth accumulation.
“I fear that we’re not looking beyond our noses,” Perryman said.
For now, the rush is on. Alex Wilcox, CEO of a small upscale airline called JSX, moved the company to Dallas from California three years ago to tap a labor pool full of former employees of American Airlines Group Inc. and Southwest Airlines Co. He went looking for a home in the swanky Park Cities area, but instead ended up building a house on an empty lot.
“It sounds extravagant, but it was actually more economical than buying a place,” he said. “We spent half for a 5,000 square foot house of what we would have spent for half that size and 60 years old in Newport Beach.”
This article was provided by Bloomberg News.