Why Is It Always Texas – Part 2

Prime Real Estate

An article in The Atlantic got me thinking (again) about why Texas is such a draw.  Both Houston and Dallas added more than 100,000 people during the 2013-2014 timeframe and not far behind in growth was Austin. After this past winter in the eastern Midwest and the Eastern seaboard it is a very good bet that this trend will continue. Throw in the insane politics of many of these areas and the best investment during the next few years may be in moving companies.

There was a time when California held this honor of being the prime destination of Easterners (as a kid in the sixties I remember the Beach Boys, Little Duce Coups, Haight-Ashbury, Jefferson Airplane, California Dreaming, all that stuff). Now they are fleeing. No water, a democratic political machine everything political, no smoking yet marijuana yes campaigns, did I say no water, 100 billion dollar trains to nowhere, taxes through the roof, rents the highest in the world, home prices along the sacred 50 mile Pacific edge totally unaffordable (can’t wait to sell and get that equity – which is a whole other market strategy), and did I mention no water. Yes, California may have absolutely fantastic weather but it hardly makes up for the idiots that now run this state. It was remarkably different when we moved here in the early seventies – very different.

But, back to Texas. Americans, as we get older like warmer weather, just ask my back. I assume that there are many in Boston that are glad the aerobic exercise of snow shoveling has lost its allure and fondly think of warmer climes – at least with a January temperatures over “frost-bite.” Time magazine published an article by Tyler Cowen in late 2013 that sums up many of the reasons why Texas is the thing and America’s future (for good or bad).

While there are a lot of issues such as automation and the impacts on the middle-class that are driving people to Texas, it is jobs and inexpensive housing that are the greatest draws. Housing is less expensive in Texas and not by a small amount of money. On average you can buy a lot more house for a lot less money than in California, New York and almost anywhere in the Northeast. A home in the San Francisco Bay area is impossible for under $600,000 and the same in New York. The same house on a larger lot in a nice community in the Houston area is $200,000. That leaves a lot of money for other things. And it’s not due to lower incomes, in all stats after living expenses, the average middle-class Texan is wealthier than their social equals in New York and Coastal California. Did I mention Texas also has no income tax.

Texas is the complete opposite of California. From economics, politics, governmental expectations, income taxes, and a much smaller government, they are dramatically different.

One reason I suspect that people are heading to Texas is because it is NOT like where they live now. Americans (at one time) wanted independence and freedom more than anything. They were told to head west, they fled the confines of the cities and all the ills found there, they wanted safety and they wanted to be fundamentally left alone. Nanny laws were anathemas, but we sucked it up. We rationalized everything, accepted everything—after all we are flexible and optimistic. But, there are still some who want to be left alone and many of them are heading to Texas.

Stay Tuned . . . . . . . 

If You Build It, Will They Come?

Last weekend the Wall Street Journal posted a story (click here) about a ghost city in China. The town, six miles down the road from Tieling in northeastern China, is designed to hold 180,000 residents and it is a long way from accomplishing that goal. Chinese central planning, the build first find residents later model is not new. Ten years ago Shanghai went through this same spurt of growth and then took years to fill in the towers, apartments and offices. But Tieling is not Shanghai (see my last blog with Shanghai's videos below).

99% of development and growth in the United States is entrepreneurial and generally responds to market forces and supply and demand. When we mess with this through too much money flowing into a sector or government meddling we end up with 2008 to 2013: too much of everything (supply) and not enough users (demand). Balance will take years.

But I guess these rules of business and economics don’t apply in China. When you are sitting on billions and billions of yuan (much of it from trade imbalances with the US and the West) it has to be put somewhere and infrastructure can be a good home. A new city here and a new city there, why not? Stimulates the local economy, makes some people rich or richer and others well, just get out of the way. 

Some hard numbers: China has 1.3 billion people, that is about four times the number of people in the United States. They expect that 350 million will leave the countryside and move to cities in the near term. That is the more than the current population of the United States. It is an unprecedented movement of people never seen in the world’s history. If this can be accomplished without political or social disaster the economic benefits are beyond measure.

Watch this video from Australia.

 (I could not post the video image so just click above)

or click here: http://www.youtube.com/watch?v=InqAzvX6UrI

This new city planning has aggressive Western architects salivating at their AutoCadd stations. Unstoppable growth, no planning commissions, not planning boards, no little-old-ladies at design review meetings berating you over fenestration details – I have died and gone to heaven.

There is no wrong or right in this. China faces unreal demographic changes and this is one way to anticipate the future. Sure there will be maintenance issues, utility issues, power supply and even short and long term health issues, but taking a fifteenth century economy into the twenty-first century in less than thirty years is difficult at best. But unlike many aging western economies they are trying.

Stay Tuned . . . . . . . .