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Why Investors Like Texas

Texas Investment Paradigm

Each year I make presentations to high-net-worth investors and private equity fund managers. Frequently, these people live in New York or Laguna Beach but invest a sizable portion of their funds in Texas real estate. They understand “the Texas investment paradigm.”

Why is it that Texas is such an attractive investment for these large investors? My colleague Dr. Ali Anari and I have come up with nine reasons:

  1. Texas is coming out of the Great Recession and leading the United States in the current economic recovery.
  2. The Texas economy is big and growing.
  3. The Texas economy is profitable.
  4. Texas has a growing population.
  5. Texas economy is an international economy.
  6. Tax burden is less in Texas.
  7. Texas has an affordable housing sector.
  8. Texans have entrepreneurial spirit.
  9. Texans are mobile.

Actually, there is a 10th reason, but we won’t publish it, because we don’t want Michigan or California to know about it.

Reason One: Texas is leading the nation out of recession

The Texas economy suffered less in terms of lost jobs and output in the Great Recession. The duration of the recession, measured in terms of the number of months of job losses, was shorter for Texas while the intensity of the recession, measured in terms of the highest job loss rate in the trough month, was lower for Texas than for the nation.

While the U.S. economy experienced its first month of job loss in May 2008, Texas continued to create jobs for eight more months until January 2009. The state’s economy experienced job losses for 16 months from January 2009 to April 2010 compared with 28 months for the nation from May 2008 to August 2010.

The Texas economy proved its resilience, and now is leading the U.S. economic recovery. From May 2010 to May 2011, the U.S. economy added 946,000 jobs, 198,400 of which, or 20.9 percent, were generated in Texas.

The chart and the table paint a pretty picture. I will discuss the other reasons Texas is attractive to investors in posts to come. 

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