Although the Southwest economy grew at a slightly faster rate in the 12 months ending in June 2001 compared with the 12 months ending in June 2000 (2.4 percent versus 2.3 percent), job growth has slowed in the past 6 months (especially in June 2001). Texas continued to lead the Southwest with an annual growth rate of 2.9 percent, or 233,200 new jobs. However, the Austin area recorded a dramatic decline in growth from 6.2 percent annually as of June 2000 to 1.7 percent as of June 2001. Employment in New Mexico grew by 1.7 percent; Louisiana, 1.6 percent; Oklahoma, 1.4 percent; and Arkansas, 1.1 percent.

Residential building permit activity in the Southwest for the first 6 months of 2001 was up more than 7 percent compared with volume in the first half of 2000. Single-family permits totaled 79,984 homes, a 6-percent gain. All States recorded increases with Texas accounting for 75 percent of all activity. Multifamily permit activity totaled more than 21,000 units, up 16 percent from 2000 at this time. Activity in Texas increased 14 percent to 16,764 units. Activity in the Dallas-Fort Worth area increased 22 percent in the first half of 2001 to 5,007 units but remains well below the annual rate of recent years.

According to the NATIONAL ASSOCIATION OF REALTORS^® , existing home sales increased 4.4 percent in Texas and 4.3 percent in New Mexico from the first quarter of 2000 to the first quarter of 2001. However, sales decreased in the remaining States, led by Arkansas at 14 percent, Oklahoma at 4.4 percent, and Louisiana at 2.6 percent.

Tropical Storm Allison caused an estimated $5 billion damage in the Houston area. The flood displaced an estimated 17,000 people, and more than 70,000 people have registered for assistance through the Federal Emergency Management Agency. Residential property damage has been put at $1.76 billion. The storm destroyed 2,744 single-family homes and 696 manufactured homes and caused major damage to 10,000 residences and lesser damage to another 43,000 residences. As a result, apartment occupancy is expected to increase by up to 2 percentage points (to nearly 96 percent) due to storm-related relocations. Single-family permit activity is also expected to increase in the coming months.

The formerly red-hot Austin area housing market is cooling as a result of the 15,000 jobs lost in the local high-technology sector since the beginning of 2001. According to the Austin Board of REALTORS^® , existing homes sales from January to June 2001 dropped 8 percent from the same period in 2000. Single-family building permit activity in the first 6 months of the year is down 27 percent compared with the first half of 2000. The rental market is also seeing more competition. Apartment occupancy has dropped from 96 percent in June 2000 to 91 percent in June 2001. With almost 12,000 apartment units under construction and half of these scheduled for completion this year, conditions are likely to remain very competitive for at least the next 24 months.

In the San Antonio area, apartment occupancy rose slightly in the second quarter to 92 percent. In the 12-month period ending June 2001, apartment rents increased an average of 5 percent. Because the 3,000 apartment units currently under construction are in line with annual absorption estimates, apartment occupancy is expected to remain stable over the next 12 months.

The Dallas-Fort Worth sales and rental markets are still strong despite a downturn in the telecommunications and high-technology sectors of the economy. Dallas-Fort Worth area builders started more than 12,000 new homes in the second quarter of 2001, a 36-percent increase over the same period in 2000. Builders also sold 8,700 new homes, a 6-percent jump. Sales of existing homes in the first 6 months of the year were off only slightly from 2000’s pace. As of June 2001, apartment occupancy stood at 94 percent, and annual apartment absorption totaled 12,800. At the end of June, 12,000 apartment units were under construction. Apartment rents have increased an average of 4.7 percent in the past 12 months. In Dallas, Denton, and Collin Counties, an average two-bedroom unit rents for $812 compared with $707 in Tarrant County.

Albuquerque area apartment occupancy increased from 92 percent in June 2000 to 94 percent in June 2001; the market is balanced. Rents for a two-bedroom apartment average $697, up only 1 percent in the past 12 months. Of the 540 apartment units currently under construction, 373 have low-income tax credits. Current production levels are adequate to meet demand over the next 12 months.

According to the New Orleans Metropolitan Board of REALTORS^® , existing home sales in the first 6 months of 2001 totaled 5,516, up 11 percent from the same period in 2000. According to local sources, affordable interest rates are expected to continue to spur home sales throughout Louisiana for the remainder of the year. New Orleans Area apartment occupancy remained at 95 percent as of May 2001 while rents increased an average of 2 percent. More than 1,925 units currently under construction in eight upscale apartment developments are expected to keep New Orleans’ luxury apartment market very competitive in the coming year.

Spotlight on Tulsa, Oklahoma

The population for the five-county Tulsa metropolitan area was just over 803,000 persons as of the 2000 census, an average annual rate of growth of 1.3 percent during the decade. Although half of the area’s population resides within the city of Tulsa, growth continues to occur in the southern suburban cities of Broken Arrow and Bixby and the northern and eastern suburban areas around Owasso and Claremore.

Tulsa’s pace of economic growth has come to a virtual standstill after a robust nonfarm employment gain for the 12 months ending in June 2000. From June 1999 to June 2000, nonfarm employment grew 3 percent (11,800 jobs). Preliminary data for June show a gain of only 700 jobs (0.2 percent) for the 12-month period ending in June 2001. Tulsa’s job growth over the next 12 months should approximate the 1.5 percent forecast by Oklahoma State University.

Over the past 20 years, the Tulsa area has made the transition from an economy based on oil and gas to one based on diversified services, technology, and manufacturing. The oil bust of the early 1980s laid the groundwork for Tulsa’s growing technology-based economy. The Williams Company, a local oil and natural gas pipeline company seeking additional business opportunities, began using its pipeline easements to establish a nationwide fiber-optic network. That network now covers 40,000 miles, connects 125 cities, and serves as a catalyst for WorldCom and other telecommunications companies to establish a local presence.

As a result, there are an estimated 350 technology-based companies in the Tulsa area, employing nearly 14 percent of the workforce (55,000 workers). Some 150 of these companies specialize in telecommunications. The largest are WorldCom with 3,000 employees and Williams Communications with 2,900 employees.

Tulsa’s high-technology industry is having a positive impact on Tulsa’s downtown. Williams Communications recently completed a 15-story technology center adjacent to their 50-story downtown headquarters. Many smaller technology companies are locating in the area, occupying some of Tulsa’s numerous art deco buildings built during the oil-boom days of the 1930s. Plans are under way for the construction of several residential developments aimed at attracting technology company employees. The first of these developments, scheduled for a fall 2001 groundbreaking, will consist of 56 townhouses priced from $180,000 to $275,000. Recently completed rental housing in the downtown area includes the 156-unit Renaissance Apartments and 31 loft apartments in the converted Tribune Building.

Single-family building permit activity in the metropolitan area for the first 6 months of 2001 totaled 1,850 units, approximately equal to the volume for the same period of 2000. Although 2001 activity will probably not reach the 1983 record level of approximately 4,900 homes, it is on a pace to exceed 3,000 units. That would be the first time that level has been reached in more than 4 years.

Sales of existing homes in the metropolitan area reached 5,240 in the first 6 months of 2001, approximately equal to the volume for the same period in 2000. The median sales price reported in June 2001 was $113,250; sales prices are increasing 6 percent annually. Recently listings have increased much faster than sales as homeowners attempt to take advantage of increasing equities and favorable interest rates to move up.

More than 6,600 multifamily units were built during the 1990s, with more than 80 percent built in the last half of the decade. The construction boom appears to be over, however, as multifamily permits dropped to 286 in 2000, and just 154 units in the first half of 2001. Occupancy rates rose steadily in the late 1990s to 95 percent at the end of 1998. With the increase of completions in 1999 and 2000, however, occupancy dropped to 93.5 percent by June 2001. Rents have increased an average of 3 percent since the beginning of 2001. The lack of more additions to the inventory should allow occupancy rates and rents to slowly increase the remainder of the year.