Paul Krugman asks in his column this morning why Texas managed to largely escape the worst of the housing bubble while Georgia leads the country in the number of failed banks. Both are states in which the major cities have relatively few zoning restrictions or natural barriers, which allows for easy sprawl to meet new housing demand. Krugman explains the difference by the better consumer protection legislation in Texas.
While this may have played a role, it is important to note that Texas had just been through a boom/bust cycle in the 80s. The state was at the epicenter of the S&L crisis. Land prices had soared with the oil boom at the start of the decade, but then collapsed along with the price of oil in the middle of the decade. Texas bankers who had lived through this experience might have had more realization that house prices could fall than bankers in other parts of the country. Of course, the experience of a recent boom and bust cycle did not affect in slowing the bubbles in either southern California or Colorado.