At the annual spring symposium on real estate at the Hyatt Regency Hotel downtown, Dr. Smith said we can expect a continued general national slowdown, generated by the housing market correction. But Houston is faring better, largely due to job growth.
"We added 100,000 new jobs to the region last year. There's another reason why Houston's housing market has fared better, and that is that, to a variety of audiences, I've talked about three problems that the national housing market is suffering right now--overpriced, overbuilt and excessive foreclosures. Of those three problems, Houston really only has the latter, and that is excessive foreclosures. But we're certainly not overpriced. And if there is any overbuilding in Houston right now, it's modest. I mean it is nothing anywhere close to what we had in the 80s."
Dr. Smith says subprime foreclosure problems may linger for the rest of the year. Diversification of Houston's economy has helped, so that energy is not the only controller of the city's economic destiny.
"It has, almost to the point in the 90s that we forgot about energy! You know, who needs energy? As diversified as we've become, Houston is still as dependent on energy as Detroit is upon the automobile. It's nice to see an energy boom, and that clearly is what is propping up the Houston economy right now."
There's an excess of inventory of oil and natural gas in the United States, but the problem is that there's not enough refining capacity for gasoline. The U.S. has even been importing gasoline.
"So what we've got is a situation where we've got gasoline prices today that are at or near an all-time high, but we have oil prices that are not even close to an all-time high. Driving season's coming, and we don't have the capacity. And we've had several major shutdowns of refineries either from accidents, explosions or for extended maintenance that has reduced our refining capacity even more."
Smith says the job growth rate in Houston could start to decline.
"That's really not a bad statement. I mean, we had four percent-plus job growth last year, which (is) far above our norm. We're going to be moving down, we expect job growth to be about three percent this year, two percent next year. We think 2008's probably going to be the low point of the decade and then we're going to start seeing job growth start to improve."
But Dr. Smith says that even in 2008, employment growth in Houston will be double the national growth rate. Ed Mayberry Houston Public Radio News.