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Potential Overbuilding Reversed by Katrina

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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 periods of overbuilding in the past. We were concerned about potential overbuilding in Houston until Hurricane Katrina hit New Orleans.


By John Burns September 30, 2005

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.

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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

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