Houston is the Biggest Housing Market
Jim Haughey
The most intense housing development in the US continues to be in the rapidly growing resort and retirement centers along the Carolina coast, the hurricane rebuilding region on the Gulf Coast, the manufacturing and business centers in the North Carolina Piedmont area and Jacksonville, FL and Austin TX. As depressed as local housing markets are, relatively intense housing development still continues in the South Florida coastal cities.
These regions are exceptions as local housing markets continue to deteriorate in most of the country. The decline in permits, starts, units under construction and sales has accelerated in the last few months and the pace of price decline has quickened. While absolutely falling, unsold inventories are more oppressive in a smaller market. Adding to homebuilders’ problems, consumer confidence fell sharply and mortgage rates rose 50 basis points in February. Homes have become less affordable and prospective buyers have become less confident about home purchases in a weaker labor market.
Houston is the largest single family housing market. Atlanta, Dallas and Phoenix have fallen well behind. Houston largely escaped the rapid run up in home prices earlier in the decade because of its’ builder friendly zoning and permitting practices. Houston homeowners have relatively few problems now with adjustable mortgage rate resets and plunging home prices. New homes for New Orleans refugees and the booming energy industry are also contributing significantly to strong home demand.
Houston has also moved to #2 on the list of top multi-family markets. Multi-family permits have nearly doubled since 2005 in contrast to 50-70% declines in 2005’s hottest condo and apartment markets. New York City is still the top market. Permits have declined very marginally in the last two years but deeper cutbacks are expected soon following layoffs in the city’s financial markets.
New Orleans is again the only large metro area with a growing housing market. This is due to hurricane rebuilding and a booming energy market. There is no signal yet that these two growing sources of new home demand will stop growing in 2008. But they are not enduring long tem sources of expanding new home demand. Each of the smaller cities on the list has a unique source of job and income growth. Four are being boosted by hurricane rebuilding and most of the rest are college town with more stable jobs or oil towns with rising energy industry employment.Atlanta leads the list of cities with the largest drop in housing permits from the peak in the housing boom two years ago. Excessive inventory is a bigger problem than declining home prices. Excepting Dallas and Houston, the other hard hit markets have experienced price declines that are causing a postponement in home purchases. Southwest Florida and Las Vegas/Phoenix will be the last markets to recover because the collapse of the local housing markets has led to significant local economic recessions.
