Realty Market is Back to Normal, Jones Says

HOUSTON – (By Ken Fountain, Contributing Writer Realty News Report) – Real estate economist Ted C. Jones told a Houston audience last week that the regional real estate market is largely back to normal conditions, similar to economy prior to the COVID-19 pandemic.

Speaking at the CommGate Economic Outlook said that the real estate market, like the larger economy, can been as a case of “perception versus reality.”

“People always ask me when we’re going to get back to normal,” Jones said. “Let me tell you –we’re already there.”

Jones said there are four primary factors that drive the state of the economy: the availability of inexpensive and reliable energy, technology, inflation-adjusted capitalization rates, and governmental policy.

While inflation remains a worry, Jones said, most of the economic fundamentals have returned to where they were in 2019, before the pandemic brought on a massive economic downturn accompanied by federal government stimulus and supply chain-driven inflation.

Jones is the former longtime chief economist for Houston-based Stewart Title and former chief economist at Texas A&M University’s Real Estate Center. Currently, Jones serves as the chief economist of the Houston Association of Realtors.

Jones, speaking to the CommGate audience of commercial real estate professionals, delivered a relatively upbeat presentation to a crowd at the Houston Country Club.

Jones sped through a plethora of charts of economic data to illustrate his theme that the Houston region – and Texas in general – has largely rebounded and is poised for even greater success.

As evidence, he pointed to the fact that Texas includes four of the fastest-growing metropolitan regions in the country, with perhaps the most surprising recent entry being the Brownsville/Harlingen MSA, driven by the move of Elon Musk’s SpaceX rocket-building and launch complex.

Another bright spot driving growth in the state is the proliferation of data centers –despite the concerns over their electricity and water demands and potential dangers of artificial intelligence, Jones said. Because of its low cost of electricity, Texas is the second-highest growth states for data centers in the nation, after Arizona, he said.

Illustrating his theme, Jones pointed to data from both U-Haul and United Van Lines (used by many firms for corporate locations) showing that Texas remains one of the top states attracting both individuals and businesses.

He said that both the commercial and housing real estate markets are largely back to their pre-COVID levels, with one major caveat – office occupancy remains depressed after the shift to hybrid work in the wake of the pandemic.

But he pointed to The Watt, the recent $93.3 million redevelopment of the former BP/ConocoPhillips headquarters into a residential apartment building as an example of how commercial developers are adapting. This was an illustration of another of Jones’s themes, how creativity can create previously unseen opportunities.

Jones cautioned that the still-sticky inflation remains a concern. He said he expects the Federal Reserve Bank – which earlier this month raised its benchmark interest rate for the first time since July 2023 – would institute at least one more rate increase before the end of the year.

The event was presented by CommGate, the commercial real estate division of the Houston Association of Realtors.

Jones entitled his talk “Choosin’ Texas” – the hit record by Ella Langley that has been No. 1 on the Billboard Hot 100 for 24 weeks in a row.

Photo credit: Ken Fountain

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