February 2016 H OUSING N EWS R EPORT

highest income tax and capital gains tax rates.

Former Dallas Fed president Richard W. Fisher likened Feroli’s report to “bull droppings.” Fisher said Texas was no longer tied to the fate of the oil industry. He argues that the Lone Star State had diversified itself considerably and could withstand the big drop in oil prices and continue to be an engine of growth for the nation. Texas has a long tradition of busts followed by booms. The last time the local boosters were so euphoric, in 2008, the economy nosedived when oil prices tanked. Today, Texas faces similar challenges — but the state’s economy has become more diversified, with financial services, manufacturing, healthcare and international trade complementing the oil and gas industries. The Lone Star State was once dependent on commodities but now boasts a highly diversified economy. “I think the Federal Reserve is holding their breath right now, hoping we sell a lot of homes this year,” said Dotzour, the economist. “If we don’t see a lot of sales and construction drops, it makes me nervous because we could have a recession again. I’m keeping my fingers crossed.” Back in October 2013, TIME Magazine ran a cover story on Texas titled “The United States of Texas,” asserting that Texas is increasingly looking like the future of the country. Written by libertarian economist Tyler Cowen, it looked at why so many Americans are headed to the Lone Star State. Cowen came to a surprising conclusion: Texas is our future. “To a lot of Americans, Texas feels like the future. And I would argue that more than any other state, Texas looks like the future as well — offering us a glimpse of what’s to come for the country at large in the decades ahead. America is experiencing ever greater economic inequality and the thinning of its middle class; Texas is already one of our most unequal states. America’s safety net is fraying under the weight of ballooning Social Security and Medicare costs; Texas’ safety net was built frayed. Americans are seeking out a cheaper cost of living and a less regulated climate in which to do business; Texas has that in spades. And did we mention there’s no state income tax?” While the oil slump is rattling some nerves in the Lone Star State, Texas still seems like the place that the rest of the United States wants to become.

According to Erica Grieder, a senior editor of Texas Monthly, and author of “Big, Hot, Cheap, and Right: What America Can Learn from the Strange Genius of Texas,” Texas looks more like America’s future than any other state. “The state has gone through an oil bust before, and it’s easy to understand why the prospect of doing so again would make people nervous,” writes Grieder. “But let’s not overlook the fact that avoiding a repeat of the last bust has been an implicit goal of state policy for 30 years. Texas is still, it seems, waiting for a rainy day, and the dropping oil prices haven’t yet amounted to one. Those who remember the 1980s, perhaps, aren’t doomed to repeat them.” Some economists are already writing off Texas. JPMorgan economist Michael Feroli warned last year that Texas economy was in serious trouble due to a sharp drop in global oil prices. “Texas is, if oil prices stay where they are, going to face a more difficult economic reality,” said Feroli. He argued that Texas is “at risk of slipping into a regional recession.” The Texas “miracle,” Feroli and other critics are warning, is only a mirage. “California’s economy is improving, and its budget is finally balanced,” crowed Vauhini Vara, a former writer for The New Yorker . “These changes happen to come as Texas, the nation’s biggest oil-producing state by far, is grappling with a collapse in oil prices.” The New York Times columnist Paul Krugman added: “So it’s interesting to note that Texas is looking a lot less miraculous lately than it used to. To be fair, we’re talking about a modest stumble, not a collapse.” In Texas, foreclosure activity increased in several heavy oil- producing markets, including Midland, Odessa and Houston. In Midland, bank repossessions — or real estate owned (REO) — increased 148 percent. Odessa saw a 77 percent year-year- year increase in 2015, while Houston reported a 91 percent jump in bank repossessions in 2015, according RealtyTrac data. But not everyone believes the Lone Star State’s economy is down and out. There other signs of strain on the Texas economy. Economists Mess With Texas Others are piling on Texas too.

Meanwhile, the Texas miracle lives on.


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