Regional Activity


In the 12-month period ending in August 1998, nonagricultural wage and salary employment in the Southwest region grew 3.3 percent, or 444,500 new jobs, with Texas accounting for 265,900 of the total. Employment growth in Oklahoma at 2.5 percent and Louisiana at 2.2 percent held steady, but it slowed in New Mexico and Arkansas. Gains in the services sector represented 43 percent of the region's job increases. In Louisiana, skilled workers remain in short supply in the shipbuilding and oil-rig construction industries.

The Texas Index of Leading Indicators is forecasting a statewide downturn within 6 to 9 months, due in part to the Asian economic crisis and weakening Latin American economies. Houston's energy-led expansion has peaked and the Dallas-Fort Worth economy is beginning to slow. The continued weakening of the Mexican economy is expected to dampen San Antonio's economy, as well as the economies along the border later in 1999.

The annual rate of existing home sales activity in the Southwest as of the second quarter was up a dramatic 24 percent to 607,000 homes. Texas' annual sales volume was up 31 percent as of the second quarter of 1998 to 373,800. Single-family building permits were issued for 107,863 homes in the region during the first 9 months of 1998, a 20-percent increase. All States recorded increases over the comparable period in 1997. Oklahoma (6,706 units) and Texas (69,191 units) led with gains of 19 and 24 percent, respectively. Activity in the Dallas-Fort Worth area through September totaled close to 25,000 homes, a 24-percent increase.

Through September 1998, Oklahoma City single-family permits (3,351 units) were almost 15 percent above the same period last year, with Tulsa (2,521 units) running 21 percent ahead of last year's pace. The entry-level market for new sales housing remains strong in both areas. Sales have been slower in the upper price range of $150,000 to $350,000. In Tulsa, home sales for the first 8 months of the year are about 17 percent above the pace for the same period last year, with the median sales price about 7 percent higher than a year earlier. September existing home sales in Oklahoma City rose 8 percent compared with the September 1997 figure, marking the eighth consecutive monthly increase over 1997 sales.

Apartment construction remains strong in both the Oklahoma City and Tulsa markets. For the first 9 months of 1998, multifamily permits were issued for 1,386 units and 1,983 units, respectively. Overall occupancy has held steady, but rent concessions have appeared in submarkets with concentrations of new units.

Apartment rents are up moderately in Louisiana, and the markets for new units look strong, especially in the higher rent ranges. The rental market in the city of New Orleans remains very competitive; apartment occupancy overall is just under 90 percent, compared with 94 percent in the metropolitan area. The first large apartment development in downtown in 50 years is to be built near the Ernest N. Morial Convention Center. The plan calls for 700 upscale apartments and a small hotel. Construction on the first 279 apartments is slated to begin in early 1999.

Spotlight on Austin-San Marcos, Texas

The Austin-San Marcos metropolitan area is the eighth-fastest growing metropolitan area in the Nation. From 1990 to 1997, the population of the area grew at an average annual rate of more than 3 percent to a total population of more than 1 million as of July 1997. Until 10 years ago, the Austin area's economy was heavily dependent on State government, universities, and agribusiness. During the 1990s the area began attracting a concentration of technology companies. More than 220,000 new jobs have been created in the area during the past decade, many in relatively high-paying, high-technology industries, which now make up roughly 20 percent of the workforce. As of August 1998, nonagricultural wage and salary employment in the area totaled 589,700, a 4.2-percent increase over August 1997. The area's unemployment rate in the first 8 months of 1998 averaged 2.7 percent, one of the lowest rates in the Nation for metropolitan areas.

State government remains a significant force in Austin's economy. Although government employment now represents 22 percent of the workforce, down from 28 percent 10 years ago, it helps to soften the impact of economic downturns.

In addition to the impact of employment growth, the large population of college students has increased demand for rental housing. The major universities in the area are the University of Texas (UT) in Austin, with an enrollment of close to 49,000 students, and Southwest Texas State University (STSU) in San Marcos, with almost 21,500 students. UT houses only 5,300 students on campus and STSU has only slightly more than 4,500 student housing units. One of the growth areas in apartment construction in recent years has been in student-targeted projects with three- and four-bedroom units.

The area rental market continues to be very strong. Apartment occupancy remains high, in spite of the large volume of construction in recent years. From 1995 through 1997, multifamily permit activity averaged 6,200 units annually. In the first half of 1998, activity was down significantly due to cutbacks in response to the large pipeline and the long approval process. However, the slowdown was short lived. Austin's planning department has begun to see an increase in the number of projects submitted for site review. In the first 9 months of 1998, permits were issued for 3,962 units, a 30-percent increase over 1997 for the same period.

Apartment occupancy should stay at about 95 percent for the remainder of 1998. Austin has become one of the most expensive rental markets in the South, according to a survey by M/PF Research, Inc. The high average rent is due in large part to the number of new units built in the 1990s, which make up about 25 percent of total inventory.

The already hot Austin sales housing market boomed during the first half of 1998, fueled by low interest rates and very strong job growth. Single-family building permits through September 1998 were issued for 6,485 homes, up 26.5 percent from the same period in 1997. Despite increased construction, the pace of sales activity has created one of the tightest markets in recent memory in some parts of the city. Existing home sales were at 14,621 for the 12 months ending in August 1998, an increase of 23 percent over the same period in 1997. The median home price was $119,600, a 4-percent increase over 1997. Sales of luxury homes ($500,000 and higher) were up 76.5 percent during the first 6 months of 1998. The condominium market is experiencing a recovery as a result of both rising rents in apartments and rising sales prices of single-family homes. The median sales price for the first half of 1998 was $83,500, up 10 percent over the price for the same period in 1997.

Sales market conditions, however, vary greatly throughout the area. Existing homes in very tight central Austin markets are selling far above the areawide average. In Austin's older, close-in neighborhoods, homes are often sold as soon as they come on the market and often for more than the asking price. In farther out suburban areas, sellers of existing homes are competing with builders offering price discounts and appealing incentives, such as free upgrades and attractive financing. Existing homes in these areas are losing value or increasing in value very slowly.

The Del Webb Corporation is developing a Sun City retirement community about 40 miles north of Austin near Georgetown. This community, which eventually will have as many as 9,500 homes, has grown to about 2,360 residents since it opened 2 1/2 years ago.

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