Resort cities still the most active housing markets

Jim Haughey

Seed Newsvine

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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 Austin and Houston in Texas. As depressed as local housing markets are, relatively intense housing development still continues in the South Florida coastal cities but interior Orlando and mid-Atlantic coast Sebastian-Vero Beach are the only Florida cities among the twenty-five metro areas with the most intense housing development.

Residential construction activity was marginally higher during the winter quarter than the low point last December but activity continues to decline in the most distressed markets and home prices continue to decline in most markets. Adding to homebuilders’ problems, consumer confidence has fallen to a recession level in the low 60’s and mortgage rates remain near 6%.

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.

For more information, please see US Metro Housing Markets – January 2008 – Cities 1-100.

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