Housing permits fell to a 1.178 million annual pace in October 2007, about half of the peak number of permits in January 2006. However, 114 metro areas averaged more permits in the last three months than at the peak of the housing boom nearly two years ago.

Housing is a local market. Overbuilding led to -75% and larger declines in permits in previously booming Florida housing markets, -50% to -60% declines in many southwestern cities and -25% to -40% declines elsewhere in the country. Nonetheless, Metro housing markets that avoided overbuilding in 2005 to 2006 and now have job and income growth, independent of the slower growth in the national economy, are expanding. Home prices are rising in many of these markets.

Today’s Hottest Markets have High Growth Industries
Today’s twenty hottest housing markets are neither resort nor retirement destinations. Instead, the top twenty cities have a dominant position in today’s high growth industries: aircraft, oil, hurricane rebuilding, electronics technology, metals, farming and capital machinery exports.

Most of these cities will fall off the list over the next year. They will not be replaced by the Florida resorts and speculator-driven California suburbs that dominated the list into 2006. Instead, the next set of rapid-growth housing markets is likely to be large cities currently experiencing relatively modest declines in starts and home prices. These cities will recover from the housing recession first. Likely candidates for the list a year ahead would be cities such as Raleigh, Charlotte, Greenville, Louisville or Boston.

Highlights from the Tables
Houston remains, by far, the top single-family construction market. Housing demand is being sustained by the expanding energy industry and hurricane refugees from New Orleans. There are 35 metro areas that have more people than Charlotte, which is ranked number seven on the list of top single-family permit metros. Similarly, Raleigh is number 12 in permits, but number 51 in population.

New York City, as always, is the largest multi-family market. The depressed Tampa and Riverside areas have dropped to the bottom of the list and the booming Seattle area has moved up to number six. The apartment share of the multi-family market fell to 30% during the 2005 to 2006 housing boom, but is likely near 50% again.

Surprisingly, Las Vegas leads the list of largest increases in number of permits because of a surge in the multi-family category in October. Foreign demand for Las Vegas resort condos is soaring as the value of the U.S. dollar declines.

The list of cities hardest hit by the housing collapse is little changed from recent months. Note that Southwest Florida (Tampa, Cape Coral and Lakeland) has a severe housing recession that threatens to persist long past the turnabout to recovery elsewhere.

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