Buy and Hold investors in Texas: are you concerned?

[Aaron Bassett]

Can the kind of economic growth rates seen in Texas right now be sustained over the long run? Is anyone concerned that the state is too reliant on Oil and Gas industries, and the manufacturing that supports them? They've survived through the 80's bubble, the recent subprime crisis, and the demand for oil worldwide is projected to grow despite any alternative fuel efforts here in the US. However, is anyone scared that a sharp, long-term drop in the price of crude could leave investors scrambling to find tenants? Just curious.

[David Ashby]

I agree with Jon, Texas is no longer the "Dallas" movie series of the 70's and 80's state dependent Oil and Gas. I lived in Houston for 6 years after living in Austin for 10 and am now back in Austin.

Austin is a technology hub, not just for semiconductor manufacturing but for actual technology start ups like Solar Winds and Dell and many others and stalwarts like Cisco, IBM, who both have a strong presence here and Google and Apple who are in the process of building campuses here along with GE and Visa.

The lack of state tax, low cost of living and abundance of land makes Texas a great prospect for major corporations to set up shop (Samsung continues to expand their chip manufacturing plant as we speak) Even in smaller towns like Waco, you see job growth and new companies coming (mostly manufacturing) simply because the cost of doing business is so much cheaper.

Texas will be fine provided we don't do something like implement a state tax....Having said that, Real Estate cycles and national economic conditions do affect Texas, just not as bad. In 2008-20010, flipping wasn't hot (but wasn't impossible) because of the credit crisis but there were a lot of buy and hold deals. Now flipping is hot again, at least in Austin and Houston, and buy and hold deals are a little more scarce due to the REO inventory thinning out and overall climate for investing.

In my opinion its not a matter of how sustainable Texas economic growth is (it will slow down at some point), its more of a question of how insulated is the state's economy from national and global market conditions and for Texas, the answer is very insulated relative to other places in the US. My recent observations regarding Texas economics are that Texas markets usually lag behind the steep declines and lead the recovery when things pick up hence making it a competitive market to invest in but safer more stable environment when things get messy.