Current Conditions in the Texas Housing Sector

The views expressed are those of the speaker and should not be attributed to the Federal Reserve Bank of Dallas or the Federal Reserve System.

D’Ann PetersenFederal Reserve Bank of Dallas

Friday January 9,Friday January 9, 2009

Economic Meltdown?

Texas Job Growth Slows

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

2000 2001 2002 2003 2004 2005 2006 2007 2008

U.S.

Texas

Dec/Dec, SAAR 2008 U.S. values

Nov/Dec, annualized

2008 Texasvalues Nov/Dec, annualized

Job Situation Better in Texas

99

100

101

102

103

104

105

106

107

108

2006 2007 2008

U.S.

DallasTexas

Fort Worth

Index, SAJan. 2006 = 100

Texas Advantages Spur Faster Growth

• Good Business Climate • Low Cost of Living• Central Location• Close Proximity to Mexico• Good Distribution Facilities• Available Land• Fast Growing Population

Texas Business-Cycle-Index Decelerates

-8

-6

-4

-2

0

2

4

6

8

10

12

-8

-6

-4

-2

0

2

4

6

8

10

12

79 82 85 88 91 94 97 00 03 06

M/M SAAR M/M SAAR

NOTE: Shaded areas represent Texas recession as defined by Yucel and Thompson.

Texas Housing Market in Decline

40

60

80

100

120

140

160

180

200

2000 2001 2002 2003 2004 2005 2006 2007 2008

IndexJan 2000=100

Texas Existing Home Sales†

U.S. Existing Home Sales†

Texas Permits*

U.S. Permits*

Note: *=Five-month moving average, †=Six-month moving averageSource: Census, National Association of Realtors, Texas Real Estate Center. Seasonally adjusted by the Dallas

Builders Still Pulling Back

30

50

70

90

110

130

2004 2005 2006 2007 2008

Index, 2004=1005MMA

Dallas - Fort WorthU.S.

Texas

Texas Housing Market in Decline

40

60

80

100

120

140

160

180

200

2000 2001 2002 2003 2004 2005 2006 2007 2008

IndexJan 2000=100

Texas Existing Home Sales†

U.S. Existing Home Sales†

Texas Permits*

U.S. Permits*

Note: *=Five-month moving average, †=Six-month moving averageSource: Census, National Association of Realtors, Texas Real Estate Center. Seasonally adjusted by the Dallas

Texas Home Sales Plunge in Recent Months

(existing homes)

90

105

120

135

150

165

180

195

2000 2001 2002 2003 2004 2005 2006 2007 2008

Index, Jan'00=100,6MMA

Dallas

Ft. Worth

San Antonio

Austin

Texas

U.S.

Houston

Texas Home Values Holding Up(FHFA repeat sales index)

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

2000 2001 2002 2003 2004 2005 2006 2007 2008

Austin San Antonio

Houston

Ft.WorthDallas

4-Q Percent Change

U.S

Texas

Other Indexes Show Slight Downward Pressure

(Case-Shiller Price Index)

-20

-15

-10

-5

0

5

10

15

20

2001 2002 2003 2004 2005 2006 2007 2008

U.S. Composite 20

D/FW

Index12-M Percent Change

Some Downward Pressure on Existing Home Prices

80

100

120

140

160

180

200

220

240

2004 2005 2006 2007 2008

Median Home Prices

U.S.

Dallas

Texas

Fort Worth

Thousands $, SA

Texas Home Inventories OK

3

4

5

6

7

8

9

10

11

12

2004 2005 2006 2007 2008

U.S.

Dallas Texas

Fort Worth

Months, SA

Foreclosures not Creating Too Much Inventory Overall

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

2000 2001 2002 2003 2004 2005 2006 2007 2008

U.S. Foreclosures U.S. Inventory

Texas Foreclosures* Texas Inventory

Percent

Note: Texas foreclosures decreased from Aug. 2005-Aug. 2006 due to the FHA's post-Katrina moratorium.Source: Mortgage Bankers Association

Thank You

Visit www.dallasfed.org

Metro Business Cycle Indexes

95

100

105

110

115

120

125

130

135

140

2003 2004 2005 2006 2007 2008

Houston

S.A.

Ft. Worth

Austin

Dallas

IndexJul. 2003 = 100

Texas

Energy Prices

0

20

40

60

80

100

120

140

160

200

300

400

500

600

700

800

900

1000

2000 2001 2002 2003 2004 2005 2006 2007 2008

TX rig count

Gas price

Oil price

Rig count, weekly Nominal price, $ weekly

Note: Gas price is multiplied by 10

Unemployment Rate

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

1978 1983 1988 1993 1998 2003 2008

Percent, SA

U.S.

Texas

Texas 5.7%

U.S. 6.7 %

Employment

-4

-3

-2

-1

0

1

2

3

4

5

6

1990199119921993199419951996199719981999200020012002200320042005200620072008

Texas U.S.

Q/Q,SAAR

(quarterly employment figure is the last month of the quarter)

History Shows Texas Outperforms

-4

-2

0

2

4

6

8

1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

Texas Avg

U.S. Avg

Texas

U.S.

Y/Y

2008 U.S. values Oct/Dec, annualized

2008 Texas values Sep/Dec, annualized