When Will The Houston Texas Apartment Specials End?

Houston Texas Apartment Specials

When will the Houston Texas apartment specials end? Probably not as soon as many local economists are hoping for. I will explain why, but before I do enjoy this interesting podcast with the Houston Chronicle’s real estate reporters Nancy Sarnoff and Erin Mulvaney. In this podcast Bruce McClenny offers some nice historical perspective of the Houston apartment market and why we are experiencing so many specials in the saturated multi-family space.

The Houston Texas apartment specials will likely not end anytime soon. McClenny actually references the “boom-bust” cycle that is part of the Houston economic landscape. What he does not mention is the underlying cause of the latest glut of apartments in Houston Texas. I have seen absolutely no mention of this elephant in the room by the Chronicle’s real estate reporters. This critical component that no local economists seem to be acknowledging has led to a dramatic reflation of the entire Houston real estate sector, and it still hasn’t been addressed. Precisely for that reason the effects will be felt for longer than many anticipate.

The unfortunate truth is that we are in the midst of another overheated real estate market, driven largely by the Federal Reserve’s intervention in the economy. After printing roughly $3.5 trillion to reflate asset prices (combined with a near doubling of the national debt in the last 8 years), it is no surprise that home prices and rents are expensive once again. Home prices and rents in the U.S. have been outpacing wage gains for years by a factor of 2 or three times, and investors have been propping up sales and prices exacerbating problems for would-be home buyers.

This imbalance in organic supply and demand fundamentals is what helped crash the oil market, an event McClenny and other economists only mention in passing as the cause for Houston’s recent softness. What nearly everyone seems to ignore are the financial shenanigans that facilitated numerous asset bubbles (including the energy bubble) as people were feeding from the Fed’s cheap liquidity. This morning’s surprisingly weak BLS employment report for March is just another reminder that all is not what it seems in the larger economy. Treasury yields will tell you as much.

Houston’s first quarter wage gains will likely come as a surprise to many as well, because they are looking everywhere for signs of green shoots that are built on a house of sand. (aka debt). Americans are borrowing more, taking out the largest mortgages on record. Many are now more leveraged than they were during the last housing bubble. Amusingly, the Fed is now worried they may need to normalize that massive balance sheet. Something tells me these apartment specials in Houston Texas will be around at least for a few more years.

At least we have Katy Perry to help us with some nice ‘Chained to the Rhythm‘ lyrics.

“Are we crazy?
Living our lives through a lens
Trapped in our white-picket fence
Like ornaments
So comfortable, we live in a bubble, a bubble
So comfortable, we cannot see the trouble, the trouble
Aren’t you lonely
Up there in utopia
Where nothing will ever be enough?
Happily numb
So comfortable, we live in a bubble, a bubble
So comfortable, we cannot see the trouble, the trouble”

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