| Austin-San Marcos, Texas
Employment activity in the Austin-San Marcos
area has changed dramatically during the past
24 months. Nonagricultural employment in the
Austin metropolitan area grew by 5.3 percent for
the year ending March 2001, when 34,300 jobs
were created, but the year ending March 2002 saw
a net loss of 6,500 jobs. The technology sector,
which was responsible for a 47-percent increase in
the population during the 1990s, was also responsible
for its hard and fast fall during 2001. A stark
symbol of this fall is the 10-story half-finished chip
design building that Intel left in downtown Austin
after the downward spiral began. Dell Computers,
one of the area’s largest private employers, cut nearly
6,000 jobs during 2001, and other technology firms
such as Motorola, Intel, Applied Materials, and
Advanced Micro Devices cut jobs as well. Manufacturing,
mostly in computers and chips, suffered a
net loss of 8,300 jobs for the year ending March
2002. Because Austin is the capital of Texas and
home of the University of Texas, the sectors with
the largest gains were the area’s old mainstays of
State and local government. There were smaller
gains in retail trade and in finance, insurance, and
real estate. The unemployment rate, at 2.7 percent
in March 2001, was up to 5.2 percent by March
2002. Although several notable area economists
see recovery starting sometime in the second half
of 2002, it is not expected to bring the explosive
growth experienced in the 1990s.
From 1998 through 2000, builders in the Austin
area struggled to keep up with demand for new
houses, experiencing shortages in workers and
materials. Permits were issued for 13,045 single-family
homes in 2000, more than double the
number in 1994. However, the number of permits
began to decline toward the end of 2000, so that
for the year ending March 2001, 9,112 single-family
units were permitted. For the year ending March
2002, the decline was 36 percent, down to 5,868
units. American Metro/Study Corporation predicts
that builders will start 7,000 houses this
year, the lowest level since 1997.
Existing home sales suffered only a slight dip for
the year ending March 2002, when they decreased
to 18,466 from 18,567 for year ending March 2001.
Median prices continued to rise from $148,000
in March 2001 to $155,800 in March 2002. The
inventory has been increasing as well, from a 3.9-month supply to 4.9 months as of March 2002. Sales
of higher-priced homes remained sluggish, but sales
of homes in the $250,000–$299,999 price range
surged, jumping 44 percent during the year. Sales
of condominiums also remained strong, with a 32-percent increase in February over the previous 12
months. With several luxury condominium projects
coming on the market, the median sales price
jumped 28 percent to $127,750. Existing home sales
are expected to remain strong during 2002 as long as
interest rates remain low. However other industry
experts indicate that the Austin-San Marcos metropolitan
area tops a national list as the area with the
greatest likelihood of experiencing a significant
decline in home prices during the next 2 years.
Despite the recent fall in employment, construction
of multifamily units has remained strong. With
employment growth averaging 5.8 percent over the
previous 3 years, and with low vacancy rates and
ever-increasing rents, development reached a high
in 2001 unseen in more than a decade. During 2001,
9,469 units were completed, an increase of 53.4 percent
over the 6,174 units completed in 2000. With
this exuberant level of construction and falling
employment, occupancy dropped to 88.1 percent
by the end of 2001, the lowest level recorded in 10
years. As a result of falling occupancy, the average
monthly rent during the first quarter was $724, an
$84 decline over the past year. Although many of
the projects that were previously expected to start
construction have either been delayed or canceled,
7 projects with 1,594 units began construction in
the first quarter of 2002. With the delivery of only
718 units during the first quarter of 2002 and the
absorption of 909 units, there was a slight increase
in occupancy from 88.1 percent to 88.4 percent.
However, 38 projects with 11,258 units are still
under construction in addition to the 1,594 units
that began construction during the first quarter.
With the current oversupply and an expected delivery
of approximately 2,000 units per quarter for the
remainder of 2002, the market is likely to remain
soft for at least the remainder of the year.
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