Regional Activity

Southwest

Jobs in the Southwest increased by 281,500 for the 12-month period ending May 2000, a 2-percent growth rate compared with a 2.7-percent increase during the same period in 1999. Over 40 percent of new jobs were in the service sector with 115,300, followed by wholesale and retail trade with 83,900, and construction with 35,500. Losses of approximately 25,000 jobs each in both mining and manufacturing dampened the gains made by the other sectors. Texas led the Southwest with a 2.4-percent rate of employment growth, followed by Arkansas at 2.1 percent, New Mexico at 1.7 percent, Oklahoma at 1.6 percent, and Louisiana at 0.5 percent.

For the first 6 months of 2000, single-family building permits in the Southwest totaled 75,728 homes, up less than 1 percent from the heated pace of a year ago. Single-family permits were up only in Texas, offsetting a drop in the rest of the region. Multifamily building permits in the Southwest region dropped a dramatic 33 percent from a year ago to 18,084 units.

During the first 6 months of 2000, the number of single-family building permits issued in Oklahoma City and Tulsa declined 20 and 13 percent, respectively. Builders attributed the decline to cooling demand resulting from higher interest rates. The Oklahoma City Metropolitan Association of REALTORS reported 6,430 existing home sales in the first half of 2000, a 6-percent increase over the first half of 1999. The average sales price for the first half of 2000 was $100,500, a 1.5-percent increase over the same period last year.

The rental market in the Oklahoma City area is currently balanced but competitive. Apartment rents are stable, and some concessions are being offered in new developments to promote lease-up. An estimated 900 units are under construction in the area. The competitive market conditions and rising interest rates are expected to limit additional apartment construction during the year.

Existing home sales in the region as of the second quarter were down 2.6 percent to an annual rate of 774,600 homes, with all States recording slowdowns in activity. Higher interest rates did not appear to have slowed existing home sales in the Dallas-Fort Worth area. According to preliminary statistics from the North Texas Real Estate Information System and Texas A&M University's Real Estate Center, 31,080 existing homes were sold in the Dallas-Fort Worth area from January through June, a 4-percent increase over the first 6 months of 1999. Sales prices for existing homes increased from 5 to 6 percent in the past 12 months. In the first 6 months of 2000, single-family building permits in the Dallas-Fort Worth area were up 6 percent to 18,405 homes.

A booming local economy enabled Dallas-Fort Worth apartment developers to lease almost 9,000 new units in the second quarter of 2000, the highest quarterly total since the Fall of 1986, according to a new report from MPF Research. Developers completed more than 23,000 apartment units in the area in the 12 months ending June 30. As of June, overall apartment occupancy was 94 percent, unchanged from a year ago. Although the rental market was strong, it became more competitive. Concessions of 1 to 2 months' free rent for new tenants were widely available. Rents also continued to rise but at a slower pace than in recent years. As of June, rents in the area were up 3.4 percent from a year earlier. Apartment developers were cutting back in light of the more competitive conditions. Multifamily building permit activity in the Dallas-Fort Worth area for the first half of this year totaled 4,092 units, less than one-half the volume for this time last year. The rental market is expected to tighten up in the next 12 months given the lower level of current construction. Only 18,200 apartments are under construction, down dramatically from the 29,000 units under construction in mid-1999.

Single-family building permits in the first 6 months of 2000 rose in the Houston-Galveston area by 8.6 percent to 14,545 homes. Apartment occupancy, currently at 95 percent, is likely to increase in coming months as a result of the limited new supply of units entering the market and the recent spurt in job growth. Multifamily building permit activity dropped 42 percent to 3,423 units.

In Louisiana, anemic job growth contributed to a 5-percent decline in the already low single-family home building permits. Local housing sources indicate that home sales for the year will likely be 5 to 6 percent below 1999 and that the average sales price will remain unchanged.

In the San Antonio metropolitan area, single-family building permits were down 11 percent to 4,018 for the first 6 months of 2000. Higher interest rates were credited with dampening demand in this price-sensitive market in which buyers in the $100,000 and below price range make up a larger share of the sales than in other major Texas markets.

The Austin-San Marcos metropolitan area continued to be one the hottest markets in the Southwest. In the first 6 months of this year, permits were issued for more than 5,100 homes, an 11-percent increase over last year. The apartment market was also one of the strongest and tightest in the Nation. Average occupancy in apartment developments in the area at mid-year was more than 98 percent. Multifamily permit activity through June totaled 3,998 units, a 19-percent increase. Despite construction of an estimated 5,000 new units this year and approximately 30 developments in the pipeline, the market is not expected to loosen anytime soon. This is especially true if the area continues to add 30,000 new jobs annually, as it has in each of the past 3 years.

Spotlight on Albuquerque, New Mexico

Between 1992 and 1995, the Albuquerque economy boomed due to an expansion of high-technology manufacturing (Intel, Phillips, and others), telecommunications services (call centers), and accompanying construction activity. In 1994, the rate of nonagricultural employment growth peaked at 6 percent, or 17,800 new jobs, and homes and apartments could not be completed fast enough to meet demand. The rate of job growth subsequently dropped to a still-healthy 2 percent in 1996 and has remained approximately that level through 1999.

Beginning in the later half of 1999, the annual rate of job growth began to increase. In the 12 months ending in May, nonagricultural wage and salary employment was up 2.5 percent, or 8,500 new jobs, and this rate of growth is expected to continue for the near term. Intel announced in May that it would begin construction immediately of a new chip plant that will add 500 to 1,000 jobs to its 5,200-person workforce in the next 3 to 5 years. EMCORE Corporation, which makes optical products for data- and telecommunication applications and solar cells for satellite communications, announced plans in June to expand significantly its Sandia Technology site. EMCORE currently has 220 employees and anticipates that employment will increase dramatically when the new facility is complete. Phillips Semiconductor requested recently a $400 million industrial revenue bond to retool its chip plant, which will preserve its 925 high-paying jobs. Major reconstruction of the I-25 and I-40 interchange in Albuquerque and reconstruction and repairs resulting from damage by the recent fires in Los Alamos also will boost local economic activity.

Homebuilding in the Albuquerque area has been very strong during the past decade. Single-family building permit activity has increased steadily from an average of 1,600 homes annually in the first 3 years of the decade to an average of 4,500 homes during the period from 1993 through 1997. During the past 2 years, activity increased another 10 percent to 4,950 homes a year. Single-family building permit activity in the first 6 months of 2000 totaled 2,508 homes, down 11 percent from this time last year, but almost equal to 1998's volume for the period. Between 1990 and 1998, the sales prices for existing homes rose an average of 5 percent annually. However, with the slower economic growth and increasing supply of homes available, prices increased by only 1.7 percent in 1999. Existing home sales totaled 7,077 in 1999, topped only by 7,082 sales in 1994. As of July, the Albuquerque Board of REALTORS reported 5,154 existing homes listed, almost a 9-month supply at the current sales rate.

During the boom years of 1994 through 1997, permits were issued at an average of 1,625 multifamily housing units per year. With the slowdown in the economy and increased affordable homeownership opportunities, the rental market softened. Apartment occupancy rates fell to 88 percent as of March 1999, and concessions of 2 months' free rent were common. Multifamily building permit activity dropped to less than 400 units in 1999 and totaled 128 units in the first 6 months of this year. With the increased rate of growth in the economy and the drop in apartment construction, conditions in the rental market improved this year. Apartment occupancy reached 92 percent at the end of June.

The city of Albuquerque was very active in the development of affordable sales and rental housing. Since 1995, almost 28 percent (1,858 units) of the new apartment units built in the city have received low-income housing tax credits. The 200-unit Bluewater Village development in Northwest Albuquerque was built on city land and financed with tax exempt bonds to make 20 percent of the units affordable. A long-abandoned apartment complex in southeast Albuquerque was razed, and 16 three- and four-bedroom townhomes will be built on the site. The homes are expected to sell for $88,000 to $94,000. The homes will also have a $20,000 HOME-financed silent second mortgage so that they will be affordable to households with incomes below 80 percent of the area median income. HOME funds are also being used to finance 50 percent of the cost of a 40-unit apartment complex for the disabled. Ten units will be affordable to tenants with only Supplemental Security Income (SSI), and another 10 units will be affordable to households with incomes at or below 30 percent of median family income for the area.


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