Loan Standards, Property Protections Benefit Texas Real Estate

Loan Standards, Property Protections Benefit Texas Real Estate
May 24, 2010

Julie Drenner

Julie Drenner is R Street’s Texas director and a co-founder of the institute. She... (read full bio)

Most states continue to face vast real estate problems, but Texas has a healthy real estate market thanks to restrictions on risky loans, efforts to overturn problematic federal appraisal standards, eminent domain limits, and tax relief, according to researchers at Texas A&M University.

The Real Estate Center at Texas A&M University reports statewide increases in both sales volume and price in the last quarter. Although the rest of the country is suffocating under an avalanche of foreclosures, sales volume for existing single-family homes in Texas is up 4 percent above the first quarter of last year. Median home prices rose 3.13 percent in the same time period.

"For more than a decade, our state's home-equity lending laws have provided Texas homeowners with some of the strongest consumer protections in the nation," says Bill Jones, chairman of Texas Association of Realtors. In 1997 the state legislature capped lending to 80 percent of homeowners’ appraised home value, which made it more difficult for Texans and Texas banks to become overextended on mortgages.

Modest Appreciation
Rather than soaring as they did in California, Florida, New York and most other large states, Texas property prices appreciated modestly since 1997.

Massive foreclosures and overbuilding have been relatively rare in Texas, the market has not been flooded with unsold properties, and the inventory of available housing has remained low.

“Other states, such as California and Florida, are seeing significant foreclosure increases due to high unemployment rates in combination with exotic mortgage-financing options such as option ARMs. Texas is not experiencing the same levels of pressure in these areas," said Jim Gaines, an economist with the Texas A&M Real Estate Center.
 
Property Protections
When federal laws in 2008 made it nearly impossible for lenders and buyers to select their own real estate appraisers, Texas acted to overturn problematic parts of the federal law and replace them with its own standards.

A new law that took effect earlier this year allows the Texas Comptroller to audit and review appraisal districts’ procedures, methods, governance, and taxpayer treatment, making the process more consistent throughout the state.

“We look forward to working with appraisal districts in our reviews and value studies to ensure fair and accurate appraisals,” Comptroller Susan Combs said. “Texas taxpayers expect and deserve efficient service and uniform appraisals so property taxes are shared equally among taxpayers.”

Texas voters likewise approved a constitutional amendment limiting the state’s eminent domain powers, thus increasing the value of private property. The new measure, Proposition 11, prevents state and local governments from seizing private property and giving it to private developers for economic development purposes alone. Governments can still take property for public purposes such as building of roads and parks.

Sen. Kay Bailey Hutchison (R) said the amendment was a “first step” toward strengthening private property rights.

Julie Drenner (jdrenner@heartland.org) is director of the Austin, Texas, office of The Heartland Institute’s Center on Finance, Insurance, and Real Estate.

Julie Drenner

Julie Drenner is R Street’s Texas director and a co-founder of the institute. She... (read full bio)