Texas also has a lot of competition for said talent. Specifically a lot of that Harris County talent you mentioned goes to A&M; it's closer in proximity.
There is no school on the planet with a more inflated view of itself than Michigan, both in terms of athletics and academics. It really isn't even close. Just go to Wikipedia and pull up their program's page. It's stunning to see what they've actually won over the years relative to their reputation, even if you are a really knowledgeable college football fan. It just "feels" like they have won a lot more than they have. The peak of their program was 1901-04...seriously. I'm not being facetious. They've had other good runs of play that culminated in titles, but the peak of their program was 120 years ago.
Michigan's most notable achievement as a program is that they started playing college football essentially before anybody else, therefore they have the most all-time wins and some notable iconography/pageantry (the helmet, the fight song, etc.). Their last outright national title was 70 years ago. Their greatest coach was Bo Schembechler, who Michigan fans will describe to you as being Bear Bryant, Bobby Bowden, and Tom Osborne rolled into one. Schembechler never won a national title, went 2-8 in the Rose Bowl, and his most notable achievement was going 5-4-1 during the 10-year period in which he and Woody Hayes overlapped, even though Hayes was the far more accomplished coach overall. There is more mythmaking about Michigan than any other program, therefore that makes their fans the most obnoxious. Other fanbases have obnoxious fans - Ohio St, Alabama, etc., but at least they've won stuff.