Potential Overbuilding Reversed by Katrina

Featured Major Market: Houston Houston has steadily risen from a relatively small housing market in 1987 to the third largest housing market in the country. Houston has always been known for its pro-growth, pro-developer attitudes, which has lead to peri

September 30, 2005

This article first appeared in the Potential Overbuilding Reversed by Katrina issue of Pro Builder.

Featured Major Market: Houston

Houston has steadily risen from a relatively small housing market in 1987 to the third largest housing market in the country. Houston has always been known for its pro-growth, pro-developer attitudes, which has lead to periods of overbuilding in the past.

We were concerned about potential overbuilding in Houston until Hurricane Katrina hit New Orleans. Then, hundreds of thousands of New Orleans evacuees immigrated to Houston in search of jobs and housing. Subsequently, Houston was evacuated due to Hurricane Rita. As we go to press, preliminary reports are that Houston was spared serious damage.

In the short-term, we know that construction in Houston will be delayed by two weeks or more. In the long-term, nobody knows for certain whether Houston will continue to grow, or if the scare of the hurricanes will drive more people and employers elsewhere.

Featured Major Market: San Antonio

The steady rise in construction has also occurred in San Antonio, a city with an economy that is also benefiting from the hurricane. San Antonio's government officials are extremely pro-growth, and have been successfully attracting major businesses to south San Antonio. Like Houston, San Antonio is now benefiting from an influx of hurricane refugees.

Most notable about San Antonio, however, has been the recent acquisition activity that has changed the landscape from one of major local builders to one of major national builders. Recent acquisitions by Standard Pacific and The Corky McMillin Companies are just the latest evidence of this transition that began with KB Home's acquisition of Rayco in 1996.

jburns@realestateconsulting.com

Top 25 Metro Areas

			Employment			Affordability			Permits
		Short-Term Outlook/Grade	1-Year Payroll Employment Growth	1-Year Growth Rate	Unemployment Rate	Median Resale Home Price	Resale Housing Costs as % of Income	Housing Cycle Barometer	12-Month Single-Family Permits	1-Year Single-Family Growth	12-Month Total Permits	Total Permits as % of Peak Permits
1	Atlanta	B	8,900	0.39%	5.5%	$162,145	23.6%	4.4	57,895	-0.3%	72,661	97%
2	Phoenix	B	71,100	4.33%	4.3%	$255,000	41.7%	6.4	56,218	2.6%	63,092	96%
3	Houston	B	26,800	1.18%	5.3%	$144,500	26.0%	4.3	48,119	4.2%	59,558	91%
4	Riverside-SB	B	19,100	1.67%	5.4%	$358,000	61.6%	6.6	44,352	10.7%	50,916	88%
5	Dallas	B	15,600	0.82%	5.1%	$161,000	27.3%	3.5	29,612	-1.3%	35,885	49%
6	Las Vegas	A	61,400	7.57%	4.3%	$299,000	52.0%	5.7	28,025	-15.3%	33,339	81%
7	Chicago	D	22,900	0.61%	6.7%	$256,600	40.7%	6.7	27,960	0.0%	40,274	95%
8	Orlando	A+	39,800	4.13%	3.7%	$200,000	35.8%	5.7	26,077	-3.7%	33,773	95%
9	Tampa	B+	34,700	2.76%	3.8%	$185,000	36.4%	6.2	25,588	14.8%	33,505	88%
10	Washington D.C.	B+	74,500	3.25%	3.6%	$410,000	45.6%	6.8	24,124	10.0%	31,878	84%
11	Fort Myers	C+	9,400	4.74%	3.2%	$207,392	36.8%	6.9	20,301	58.3%	25,637	100%
12	Minneapolis	C+	23,400	1.35%	3.3%	$236,500	32.8%	6.4	18,363	-11.8%	25,153	89%
13	Charlotte	A	28,500	3.73%	5.5%	$160,000	27.4%	2.5	17,532	0.9%	20,548	90%
14	Sacramento	C	10,900	1.27%	4.7%	$392,000	60.3%	6.7	16,933	-10.1%	20,773	87%
15	Denver	A	21,100	1.80%	5.3%	$248,000	36.6%	5.9	16,879	6.7%	20,826	72%
16	Jacksonville	B	16,400	2.84%	4.2%	$159,900	27.7%	5.3	16,861	20.8%	23,080	100%
17	Fort Worth	B	11,300	1.43%	5.0%	$116,600	20.8%	5.0	15,872	8.7%	18,812	49%
18	Austin	B	14,200	2.14%	4.3%	$165,400	29.4%	5.0	15,332	-4.7%	19,755	74%
19	Nashville	B	11,800	1.66%	4.3%	$151,000	27.2%	5.2	13,517	6.1%	16,957	92%
20	San Antonio	B+	11,800	1.56%	4.9%	$135,000	27.6%	2.8	13,363	2.3%	20,007	100%
Sources: Bureau of Labor Statistics; Census Bureau through the month ending July 2005; John Burns Real Estate Consulting