The rapidly growing resort and retirement centers along the Carolina coast continue to have the most intense housing development in the US. This is followed closely by the hurricane rebuilding region on the Gulf Coast, including Houston and the manufacturing and business centers in the North Carolina Piedmont area plus Austin Texas. No Florida metro areas remain in the list of the twenty five cities with the most intense housing development. Residential construction continues to sink rapidly in the most overbuilt housing markets experiencing 20% declines in home prices but is only stalled or ebbing slowly in most of the country.

In addition to falling home prices, recession level consumer confidence, and tighter mortgage underwriting standards, new home demand is now being restrained by shrinking contractor margins from an abrupt jump in building cost and a 50 basis point jump in mortgage rates caused by a rise in inflation expectations by lenders.

Homebuilders have now been hit with the spike in materials costs that appeared a few months earlier in nonresidential markets. Although lumber, plywood and gypsum pricing remains weak, the prices for metal and energy based materials are now rising at a 20% plus annual pace and delivery surcharges are raising the price of all items at the jobsite.

Houston is by far 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 remains at #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 although permits are declining with deeper cutbacks are expected soon following layoffs in the city’s financial markets. Permits are up from a year ago in many college and oil patch towns that escaped both the 2005-06 housing boom and the worst of the ongoing economic recession.

New Orleans is the only large metro areas with a growing housing market. This is due to hurricane rebuilding and a booming energy and export market in New Orleans. The current interruptions of Mississippi barge traffic bringing bulk farm cargos downriver for export and bulk industrial and construction material cargos up to the Midwest threatens to be a major income loss for New Orleans.

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 – May 2008 – Cities 1-100.

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