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Saturday, April 17, 2010

Texas, Washington DC and North Carolina are Strongest Single Family Markets

Reed Construction Data

Dallas and Houston together now have more multi family permits than New York City. New York City had nearly 25% more multi family starts than Dallas and Houston apartments combined as recently as 2007. The recession cut permits about 80% in New York City but only about 50% in the two Texas cities. 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. San Francisco and San Diego have returned to the list of top multi family markets due to hiring by their growing technology industries.

Twenty-six cities are now issuing more housing permits than they did at the peak of the housing boom in late 2005/early 2006. All of these cities are very small markets. This should not be interpreted as a list of cities leading the housing market or the economy out of recession. These cities simply missed most of the recession as they did the previous housing boom. Eight of the twenty cities with the largest increase in permits since the peak of the housing boom are either on the Gulf Coast or in the Plains States. The gulf cities are getting a boost from Katrina rebuilding funds. The cities in the Plains States with resource based economies fared better during the housing recession than cities with economies dominated by manufacturing, construction or finance.

The most depressed housing markets relative to the peak of the housing boom continue to be Atlanta and Phoenix The twenty cities with the largest decline in housing permits from the peak of the housing boom more than three years ago are all paying back the overbuilding during the housing boom or the phantom sales of homes to households who overreached and could not carry their mortgage even before job losses began across the economy. Each of these cities is now beset with a relatively large surplus of homes for sales and, in most cities, continuing decline in home prices. Homebuilders in these cities are competing with a large selection of existing homes priced at or below the cost of constructing a new home. In the most depressed markets, homebuilders are also competing with a shadow inventory of more than a million empty homes. These are investor or bank owned homes, not listed by real estate agents, being held home prices improve significantly.

Austin, Charlotte and Raleigh real estate markets have the most intense housing development among all large metro areas, about five times more permits per population than the national average. Las Vegas, Phoenix, Riverside, Tampa and Orlando are the only housing boom cities still left on the top twenty list. Washington has moved up to third place on the strength of tens of thousands of new federal jobs. The Obama agenda promises even more aggressive federal hiring in 2010. Atlanta, the largest housing market for several years has dropped to 8th place due to a weak Georgia economy and a large surplus of unsold homes. Fourteen metro areas, all manufacturing centers without any of today’s high growth industries, have issued less than two permits a month over the last year. Sandusky Ohio has issued no permits and Wheeling West Virginia has issued only one permit. Texas accounts for over 15% of the single family housing permits issued in the last year. Houston and Dallas are by far the two largest markets. Austin and San Antonio apartments are also among the top ten markets.