Employment trends in the Southwest region during the past 12 months indicate that job losses have slowed and may have bottomed out. During 2001 nonfarm employment in the region increased by 104,000 jobs; during 2002, however, the region lost 129,000 jobs, wiping out the prior year’s gains. In the 12 months ending February 2003 nonfarm employment declined by 95,100 jobs, or less than 1 percent, compared with the same period a year earlier. Whether this marks the beginning of a recovery remains to be seen because nonfarm employment has remained generally flat for the past 2 months. The manufacturing sector continues to be the hardest hit part of the economy with a loss of 104,700 jobs. Significant declines in jobs have been registered in the business and professional services, transportation, trade, utility, and information sectors. These declines were partially offset by job increases of 67,300 in education and health services and 45,300 in government.

In Texas losses during the 12-month period ending February totaled 68,400 jobs; the Dallas metropolitan area alone recorded a loss of 50,000 jobs. New Mexico is the only state in the region to record an increase in jobs, gaining 9,700 jobs, almost all in education, health services, and government. In Arkansas, Louisiana, and Oklahoma job losses in the manufacturing sector offset any gains in other sectors.

The unemployment rate in the Southwest region is unchanged from a year earlier. The average unemployment rate during the 12-month period ending February 2003 was 6 percent. Within the region, unemployment rates range from a low of 5.6 percent in Oklahoma to a high of 6.6 percent in Texas.

Despite slow economic conditions, residential building activity in the Southwest region continues at very high levels, although a couple of states are down from their record levels of 2002. Building permits throughout the region authorized a total of 178,186 single-family units during the 12 months ending March 2003, 9 percent above the 12 months ending March 2002 and more than 13 percent above the same period 2 years ago. Within the region single-family permits are up less than 10 percent in Arkansas and Texas but exceed 10 percent in Louisiana, New Mexico, and Oklahoma.

Based on data from the Real Estate Center at Texas A&M, sales have averaged approximately 16,400 homes a month during the 12 months ending March 2003. The average price of all homes sold in the past 12 months was $156,000, 3.6 percent higher than the year earlier period. In the Dallas metropolitan area the number of homes listed for sale is 24 percent higher than a year ago and home sales are down approximately 2 percent from a year ago. At the other side of the Metroplex, sales in the Fort Worth metropolitan area are more than 6 percent higher than a year ago. One factor affecting the increase in Fort Worth’s sales rate is home affordability. The 12-month average sales price was $116,750 compared with an average sales price in the Dallas area of $183,000. Sales volume in the Houston and Austin areas during the 12-month period ending in March was approximately equal to that for the comparable period 1 year earlier. In Austin the average sales price of a home during the 12 months was $194,650, the highest of any metropolitan area in the state.

Local sources in many of the other metropolitan areas in the region report softening sales markets with decreased prices and increased number of listings and average days on the market. Concessions are being offered in numerous metropolitan areas, and in Albuquerque, at least one developer is offering a full-furniture package and interest buydowns for the first 2 years to try to sell available new units.

Rental construction in the Southwest region as measured by multifamily building permit activity totaled 57,806 units for the 12 months ending in March 2003, an increase of more than 14 percent over the corresponding period in 2002. Multifamily permit activity during the past 12 months was 50 percent higher in Louisiana, 43 percent higher in New Mexico, and 16 percent higher in Texas compared with a year earlier. The Dallas metropolitan area registered an 8-percent decrease in multifamily permit activity for the 12-month period to 9,794 units, reflecting builder cutbacks in response to the large loss of jobs, a shift to homeownership, and soft market conditions in existing inventory. Despite flat employment levels in the Houston metropolitan area, multifamily permit activity during the past 12 months increased almost 90 percent over the volume 1 year earlier to 17,184 units. In the Fort Worth metropolitan area, permits were issued for 4,464 units during the period.

High construction levels and weaker renter demand in most of the major metropolitan areas in the Southwest region have resulted in rental vacancy rates approaching or exceeding 11 percent. The Austin metropolitan area has the highest vacancy rate in the region at 13 percent. Given the current levels of new apartment construction, in many of these areas; the expectation of continuing strong sales to first-time homebuyers; and prospects for a slow recovery or further employment losses, apartment vacancy rates are expected to continue to rise during the remainder of 2003.