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The Galveston
Real Estate Market

by David Stanowski
23 May 2007

Cheerleaders for high-growth Sunbelt areas, like Phoenix, have maintained for years that there is a constantly rising demand for houses, in their cities, due to a nearly unlimited number of people who want to live there. After all, who doesn't want to leave the cold, and depressing Northern climates to live in the Sunbelt? Apparently, not everyone!

San Diego boosters have been using this line of reasoning for decades, but this city has been experiencing a net out migration, for at least the last 2-3 years, which is finally contradicting their Conventional Wisdom. The aggravations of life in San Diego, and most of Southern California (high cost of living, crime, long commutes, over population, etcetera) are finally outweighing the attractions of living there.

There are also many reasons that people want to live in Galveston, and those who do believe that it is a truly magical place!
It is unique and enticing, primarily due to the fact that it is the only  rehabilitated 19th-Century Southern city, that is located right on the beach! This part of The Island is also protected by this country's only real Seawall, making it the safest location in Hurricane Country!

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The West End of The Island offers beach-house living to both the locals, and to the 4-5 million people who live in the nearby Houston Metro area. With all that Galveston has to offer, it still has lost 4,400 residents, since 1980, while most of the Sun Belt has been growing by leaps and bounds!

The reasons behind this lack of growth, and why some people have been leaving, has to have an impact on the local real estate market. This means that
the problems and drawbacks of the City must be considered, along with all of its finer points, in any thorough analysis of this market.

For this study, Galveston's residential real estate market was divided into three areas. The East End, which is basically the 77550 Zip Code; i.e. everything east of 45th Street. Mid-Island; from 45th Street to the end of the Seawall, and the West End; everything west of the Seawall.

Average insurance rates for Galveston, versus typical inland areas of the country, were unavailable, but even with the protection of the Seawall, in the East End, and Mid-Island, it is no secret that rates are still far higher than in most areas of the country, without the risk of hurricanes. 2005 data do confirm that the State of Texas has the highest rates in the nation, however.

In addition, more and more insurance companies are choosing to pull out of Hurricane Country, rather than just raising their rates. The West End has no protection from hurricanes, so insurance rates are even higher. Fire insurance rates are probably higher, than average, in the East End, due to the closely-spaced wooden buildings.

Property Taxes:
2004 data show that
property taxes rates, in the State of Texas, are higher than in all but 13 other states. There are 254 counties in Texas, and only 65 have higher property tax rates than Galveston County! In addition, a study of 2005 property tax rates, by the Tax Foundation, shows that the property taxes paid, in Galveston County, are higher than in all but 60 counties, in the ENTIRE COUNTRY; when calculated as a percentage of the median value of the houses!! This means that when considered on this basis, property taxes in this county are higher than in 92% of all U.S. counties!
Source: State Property Taxes: The Tax Foundation
Source: County Property Taxes:
Source: County Property Tax Rankings: The Tax Foundation:

Electricity Rates:
Rates in Texas are higher than in all but 13 other states!

Sources: "Electric Power Monthly";

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The local government school system is universally considered a liability to real estate values. Stories of families, with young children, leaving Galveston for lower priced houses, and better schools, on the Mainland, are very common. According to, GISD ranks below state and county averages in reading and math proficiency scores. Galveston scored 77.8 in reading and 65.6 in math, Texas City scored 82.9 in reading and 66.4 in math, League City scored 93.2 in reading and 86.8 in math, and Houston ISD scored 74.7 in reading and 58.5 in math. In other words, Galveston schools perform like Houston inner-city schools, not like affluent suburban schools, such as League City!


Vacant Housing Units:
As the national bubble has ended, the number of vacant housing units has been rising rapidly, which adds to supply, tends to degrade neighborhoods, and puts downward pressure on prices. The 2000 census data showed that 20.6% of all housing units in Galveston were vacant, while in Texas City it was 7.4%, in La Marque it was 8.6%, in League City it was 6.3%, and in Houston it was 8.2%.
The U.S. number was 11.4%.

At the time of the census, Galveston had about three times more vacant housing units as in nearby cities.
(This survey did NOT count second homes as vacancies.) More recent estimates, of vacant housing units in Galveston, are lower than those at the time of the 2000 census, but at 13%, they are still running at above the national average! If the current national trend holds true, in Galveston, the number of vacant housing units should already be rising!

Vacant Homes

Renter-Occupied Housing Units:
Most studies show that neighborhoods and cities with high percentages of owner-occupied housing units are better maintained, and hold their values better than those with high percentages of renter-occupied housing units. The 2000 census data showed that, in Galveston, 56.4% of all housing units were renter occupied, while, in Texas City 36.7%, in La Marque 26.9%, in League City 23.0%, and in Houston 54.2% were renter occupied. Galveston does not have high owner-occupancy rates to help support its real estate market.


Median Household Income 2005:
Galveston $30,500, Texas City $37,900, La Marque $36,700, League City $71,500, Houston $36,894, State of Texas $42,139, U.S. $46,242. Galveston has the lowest median income of area cities, and it is lower than the median for the state of Texas, and for the country, as a whole.

Source: U.S. Census Bureau

Crime Index 2005:
Galveston 568.3, Texas City 479.9, La Marque 487.6, League City 150.3, Houston 655.8, U.S. 325.2. 
Galveston's Crime Index is higher than all these area cities, except Houston, and almost twice as high as the national average!!

Lead Paint:
Recent articles in The Galveston Daily News, and in The Houston Chronicle cited studies showing that the occurrence of lead paint, in Galveston's housing stock, is much higher than in most area cities. “… on a per-capita basis, the island has a higher rate of lead contamination than just about anywhere else in the country, local experts say.” They indicate that local children are showing significant amounts of lead poisoning which is adversely affecting their health, and school performance. This is due to the fact that the East End has a very old housing stock, containing a lot a lead paint, and it has been unable to do much to get it removed, due to a variety of reasons. Lead-Based Paint: Galveston

Even though I love living in Galveston, since I think that the benefits far out weigh the drawbacks, I must admit that I see a high probability of some real difficulties ahead due to the fallout from the national real estate bubble. This City offers a very unique and enjoyable lifestyle, but many of the factors, effecting the real estate market, cited above, increase the cost of living, add to the cost of housing, and negatively impact the quality of life in Galveston.

East End:
There is no question that the East End represents a very unique and enticing place to live, which is why we call it "The Magical Island Kingdom". However, the hundreds of historical houses and buildings that make it unique, also create many special problems. Grand houses, well-kept residences, run-down single-family homes, boarding houses, and vacant and abandoned buildings rub shoulders with each other in the tight spacing of these neighborhoods. This creates an interesting situation where the upper and middle classes live side by side with many from the underclass, and even some vagrants. This area is not a small town; it is a small city, and it has the demographic profile of many inner-city neighborhoods.

The historical buildings, that make up this area, are expensive to buy, rehabilitate, maintain, and insure; the cost of heating and cooling them is very high, due to the lack of insulation and ventilation, and the high local electricity rates; and property taxes are higher than in 92% of all the other counties in the entire country.

This means that the upper class finds their investments, in the grand houses that remain, constantly threatened by the potential deterioration of the neighborhood around them, while the middle class faces the same risk to their investments, even as they find it more and more difficult to afford to live here. At the same time, the availability of cheap housing, in poorly-maintained buildings, has attracted a relatively large number of low-income residents, and v
acant and abandoned houses are often taken over by vagrants and squatters.

This odd demographic mix
explains the high number of renter-occupied housing units, the below-average median income, and the poor school system. It adds greatly to the costs of social services, for such a small city, and pushes up the crime rate. All of these conditions negatively effect the real estate market. Further pressure on this volatile mix of conditions from rising foreclosures, out migration, and more vacant buildings, could be a major blow to this area.

As much as I love the East End, I know that there is not an unlimited supply of people who want to live there. If current residents, and potential owners and renters begin to feel that these problems outweigh the benefits, they could easily reevaluate the advisability of investing in, and living in, the East End, and conditions could decline very quickly.

This area is composed of mostly modern residential dwellings, so it does not have the charm of the East End, but it also doesn't have all its problems. Like the East End, Mid-Island is one of the safest areas in Hurricane Country, because it is built behind the Seawall. It also has the advantage of being on, or near the water, as well as having easy access to the charms of the East End. Although it doesn't have the same demographic mix, and the expenses of historical buildings, it does share high insurance, property tax, and electricity rates with the East End, as well as the poor school system, and high crime rate.

West End:
The West End offers the beach-house lifestyle to both full-time residents, and those who want a second home, which is why it is the area undergoing the most rapid development. However, this is also the only section of The Island with no protection from hurricanes. The next time the threat of a major hurricane enters the consciousness of potential buyers, or insurance rates jump, property values could take a major hit.

It would probably only take a Category 3 hurricane to inflict extensive or total devastation on the West End. Even if the East End, and Mid-Island made it through such an event without major damage, the damage on the West End would effect the rest of The Island. The loss of property taxes, sales taxes, and income, to Island businesses, would be a major blow.

The West End also suffers from constant beach erosion, which threatens property values, even without the presence of hurricanes!

Like Mid-Island, the West End doesn't have the same demographic mix, and the expenses of historical buildings, as the East End. However, it does share high insurance, property tax, and electricity rates, as well as the poor school system.

For more information on Galveston Economy:


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