Dallas Housing Market: Nation’s Most Stable

Dallas Business Journal – by Robert Edelman

With news of the Federal Reserve rate cut, anxieties about a declining housing market and a possible recession are spreading across the country. The good news for Dallasites is that the Dallas housing market is the strongest of any major city in the United States.

A recent PMI Group study reported that the risk of U.S. housing price declines remained low in many areas of the South, Midwest and Northwest. Among the 50 largest metropolitan statistical areas, Texas cities were the lowest and most stable in risk outlook during 2007.

Home prices in Dallas have avoided the speculative bubble that rapidly drove so much of America’s real estate to record prices and record unsold inventory levels. To this point, home prices in the Dallas area increased a steady 17% over the last five years, while the U.S. averaged an extreme 53.5% increase during the same time period, according to the Office of Federal Housing Enterprise Oversight. Inevitably, the rest of the country now suffers from rising mortgage foreclosures, falling housing prices and weekly real estate auctions.

Dallas has consistently outpaced the rest of the country on nearly every important economic stability indicator and is currently running counter to national housing trends. There are three reasons why.

  • First, prices have remained stable in Dallas because the Metroplex has both favorable zoning regulations and an ample land supply, factors that allow the market to keep up with demand. Few restrictions and land availability give builders easy access to enter or leave the market depending on changing market conditions. This competition has proven to be highly responsive to the market and therefore effective in creating price and supply stability.
  • A second factor that supports the continued housing demand and stable home prices is that Dallas continues to experience a robust job market. For a city’s housing growth to be stable and healthy, the demand must be reflective of internal job and income growth. Texas is adding jobs at the rate of almost 250,000 per year — nearly double the rates of Florida, Arizona and New York. The Dallas metro area alone added more than 90,000 jobs last year, leading the nation as one of the top 10 cities in employment growth. An influx of jobs, incomes and availability of living space helps keep new and used house prices in the Metroplex safe from excessive price increases and corrections.
  • The third reason Dallas has avoided the current housing crisis is its physical location, central to both U.S. coasts and Mexico. The Dallas/Fort Worth International Airport, mild climate and prime location have helped attract diverse industries and a number of major corporate relocations. The Texas economy is one of the most diverse in the country, with major players in key long-term growth sectors, notably transportation, aerospace and defense, financial services, high-tech electronics, retail and wholesale trade.

To ensure that strong housing trends continue here, proactive steps have been initiated that keep our city’s housing supply aligned with new consumer demands. For example, the Uptown housing landscape now accommodates buyers with many new housing options. Twenty years ago, few condos or high-end rentals were offered because there was inadequate infrastructure to support demand. As demand increased, zoning expanded to permit much higher densities with a mix of commercial, rental and retail properties in the area, transforming Uptown into an exciting urban experience.

Dallas developers have demonstrated real responsiveness to the needs of the market. Condo ownership and high-end apartment rentals are now a convenient alternative to single-family homes. Baby boomers who want to downsize and young adults who want to be close to Dallas’ cultural offerings are creating a need for new development opportunities.

  • The Dallas residential market, especially for condominiums, is still emerging: Dallas is the fourth largest city in the country, but only the 16th largest condominium market. Condominiums typically account for 7.7% of the housing stock in the top 50 U.S. markets. In Dallas, however, they represent only 4.4% of available housing.
  • Condos eventually will be one of the strongest sectors in the marketplace, but the housing slowdown has affected the middle-market condo and luxury condo market, although some of the slowdown appears to be psychological.
  • Condos selling for less than $400,000 have been affected by the tightening mortgage supply, but decreasing rates should provide some relief. Condos priced at $650,000 to more than $1 million also have slowed as buyers sit on the sidelines. Drexel Development Co. continues to sell about three condos a month, compared to four a month in 2007.

Dallas, by virtue of its robust job growth, land resources and location, has avoided the major housing problems that beset other U.S. cities and can leverage continued economic success by viewing its land as a reusable resource and evolving its housing market to keep up with changing lifestyle demands.

EDELMAN is president of Drexel Development Co., which builds luxury apartments and condominiums.

Dallas-Fort Worth Has Strongest Job Market in U.S.

By BRENDAN M. CASE / The Dallas Morning News

Dallas-Fort Worth added the most jobs of any U.S. metropolitan area during the 12 months ending in July, according to preliminary data released Wednesday by the U.S. Department of Labor.

Another Texas city, Houston, came in second. Dallas also edged out Houston in percentage growth.

Meanwhile, the nation as a whole lost 174,000 jobs, not seasonally adjusted, during the 12-month period. With the national economy slogging through an increasingly painful downturn, the outlook for the local job market over the next 12 months appears hazy.

“There’s definitely a slowdown,” Ms. Abbot said. “Job growth has slowed, and the [area] unemployment rate increased a little bit.”

Between July 2007 and July 2008, the Dallas-Fort Worth area added 68,000 nonfarm jobs, growing 2.3 percent – the highest growth rate among the nation’s 12 largest metropolitan areas.

Five of the 12 metro areas suffered job losses during that time.

Even looking at the 37 other U.S. metro areas with total nonfarm employment over 750,000 in 2007, only one grew more quickly than Dallas-Fort Worth – Charlotte, N.C., which saw a 3 percent growth rate.

After Dallas, the next best growth rates were in Houston, San Antonio and Seattle, Wash., which all posted growth of 2.2 percent between July 2007 and last month.

Houston trailed D-FW by more than 10,000 new jobs, adding 57,100 during the 12 months. Seattle grew by 38,900 jobs and Washington, D.C., created 35,400.

The job growth came against a backdrop of a 0.1 percent drop in U.S. employment, without adjusting for seasonal factors. (While the Labor Department adjusts national employment numbers for seasonal factors, it does not do the same for the metropolitan numbers.)

From a historical perspective, the Dallas-Fort Worth area’s job gains still fall below those of the mid- and late 1990s.

Back then, the area often generated more than 100,000 jobs in a 12-month period, and sometimes added more than 120,000 – or almost double the gains in the recent 12-month period. The annual job growth rate topped 5 percent for a time.

Since the 2001 recession, the area’s largest employment increase during a 12-month period came between May 2005 and May 2006, when it added 102,500 jobs.

The Dallas side of the area job market outweighed the Fort Worth side in the new numbers. Between July 2007 and July 2008, the Dallas region accounted for 71 percent of the area’s workforce and generated 76 percent of the new jobs, according to the Labor Department.

The Fort Worth side, with 29 percent of the workforce, added 24 percent of the new jobs.

Overall, the largest job gains in sheer numbers came in education and health services; government; and natural resources, mining and construction.

Economists say Texas is apt to continue outperforming the nation, thanks to strong exports, the state’s oil and gas activity and, perhaps most important, a relatively mild housing downturn.

But that doesn’t mean the state will be booming.

“Over the past year or so, a series of storms has broken out over the U.S. economy,” researchers Laila Assanie and Raghav Virmani wrote in another study appearing Wednesday, this one in Southwest Economy, a publication of the Federal Reserve Bank of Dallas.

“Texas entered 2008 with its economy on the wane, largely because of the drags from the nation’s slowing business activity,” they wrote. “During the first half of the year, more signs of weakness have emerged in Texas and the U.S., but the state is still doing better than the nation.”

America’s Recession-Proof Cities

Nationally, home prices are falling, unemployment is on the rise and the economy is expected to grow slowly–or even contract–in the first half of the year.

But some cities are doing just fine.

San Antonio features solid employment figures and affordable home prices that continue to rise. Its industries are growing; it can’t hurt that the new AT&T (nyse: T – news – people ) was formed when San Antonio-based SBC Communications swallowed the old AT&T Corp. and BellSouth.

The others holding steady or improving include Austin, Texas; Houston; Charlotte, N.C.; Dallas; San Jose, Calif.; Raleigh, N.C.; Salt Lake City; and Seattle.

Behind The Numbers

To find them, Forbes.com examined the country’s 50 largest metros and looked at several key measures.

We examined unemployment data supplied by the U.S. Bureau of Labor Statistics for the year ending in February 2008 to see which areas are most adding or subtracting jobs. Next, we looked at the BLS data on job growth in non-farm payrolls, through February 2008, for construction, education and health services, financial activities, information, leisure and hospitality, manufacturing, natural resources and mining, professional and business services, trade, transportation and utilities, and the BLS’s catch-all category, “other services.”

We also took into account median home price data from the National Association of Realtors–from the fourth quarter of 2006 to the fourth quarter of 2007–to see which areas posted the largest annual gains. Our data don’t account for the impact of declining sales in the first several months of this year.

Finally, our rankings were adjusted using data from a November 2007 report, “U.S. Metro Economies: The Mortgage Crisis,” by the U.S. Conference of Mayors. It lists each city’s estimated gross metropolitan product growth by projecting how rising foreclosures and falling home prices would affect overall levels of productivity in local economies.

Sunny Southern Skies

Texas cities fared best under these measures. San Antonio, Austin, Houston and Dallas-Fort Worth have benefited from historically lower home prices, which have been affordable to a large segment of the population. The availability of land–and, in some cases, little zoning–helped keep prices in these cities low. Instead of competing for homes, Texans could move to a new subdivision a little farther out.

What’s more, all four boast falling unemployment rates, with Austin dropping from 3.8% to 3.6% and San Antonio from 4.3% to 4%.

Cities that are expected to see growth in non-farm payrolls include Raleigh, which is expected to see 7.4% growth in professional and business services and 6% growth in education and health. In Salt Lake City, where the median home price rose 2.5% and unemployment, at 3.1%, is below the 5.1% national average, growth in education and health services is expected to be 5.5%.

How are you planning on weathering the impending recession? Weigh in. Add your thoughts in the Reader Comments section below.

Some cities have seen increasing home prices but otherwise continue to struggle. Buffalo and Rochester, N.Y., have seen home price growth (from a low base) but still contend with high unemployment–around 6%–and slow-growing or shrinking industries.

And in the San Jose area, the median home sale price is over $830,000. That’s 11% higher than it was in the fourth quarter of 2006, helping to land the area at No. 4 on our list. Problem is, that growth has since cooled, and it remains to be seen whether pricey homes coupled with a 5.3% unemployment rate will cause trouble for homeowners this year.

To be sure, even in the most resilient cities, the mortgage crisis has caused suffering. People everywhere got into bad mortgages. Similarly, even in the most battered cities, the majority of people are employed and making their mortgage payments. The extent of recession or resilience is very much in the eye of the beholder, and this list represents only one of many ways to take a snapshot of economies that are standing tall.

In his statements to Congress’ Joint Economic Committee earlier this month, Federal Reserve Chairman Ben Bernanke predicted the economy would possibly move into recession in the first half of 2008 but begin to rebound in the second half.

If you’re tired of waiting, these might be the best places to go.

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