The Southwest economy continued its robust expansion, although the rate of job growth appears to be slowing somewhat. Regionwide, nonagricultural wage and salary employment increased by 2.7 percent for the 12-month period ending August 1999. Growth continued to be led by Texas, with a 3.1-percent gain, followed by Oklahoma at 2.7 percent. Arkansas, Louisiana, and New Mexico recorded more moderate growth rates of approximately 1.5 percent. The Southwest added more than 362,700 jobs in the reported 12-month period, with the majority of new jobs still in the service and trade sectors. Employment in the petroleum industry dropped by 16,000 during the period, with 10,000 of the top losses in Texas.

Strong employment growth in both the Oklahoma City and Tulsa metropolitan areas has led to very tight labor market conditions. As of August, the unemployment rates in Oklahoma City and Tulsa were 2.3 percent and 3.5 percent, respectively. Sprint PCS recently announced plans for the construction of a $17 million customer service center in Oklahoma City that will initially employ 1,200 persons. Oklahoma City recently opened its Bricktown Canal in the city's old warehouse district. The mile-long riverwalk area has numerous old buildings being converted to restaurants and various other retail uses. In recent months, this once almost abandoned part of the city has seen property values soar. The first residential construction in the area, a 200-unit, market-rate rental development, was recently announced.

Homebuilding permit activity in the Southwest region during the first 9 months of 1999 remained strong at 111,760 homes, 4 percent above the record levels of 1998. All major markets in Texas recorded increases. Existing home sales in the region were also strong, with the annual rate of sales as of the third quarter up 6 percent to 827,300 homes, according to the National Association of REALTORS^®.

For the 12 months ending in August, existing home sales were up by almost 15 percent in the Austin-San Marcos area, 6 percent in Dallas-Fort Worth, 7 percent in Houston, and 14 percent in San Antonio. Elsewhere in the region, the Albuquerque Board of REALTORS^® reported that sales of existing homes in the first 9 months of 1999 hit a record-breaking 5,500. The median price of homes for the first 9 months of 1999 was $127,000, up 2.3 percent compared with the same period in 1998. The Oklahoma City Metropolitan Association of REALTORS^® reported sales of 9,486 houses in the first 9 months of 1999, only 1.6 percent less than the record-setting pace of 1998.

Conditions in the Dallas-Fort Worth rental housing market are very strong. Apartment occupancy is in the 94- to 95-percent range. Apartment occupancy rates are higher than expected because labor and material shortages have lengthened construction times and are slowing the completion of new units. The market is expected to soften somewhat during the next 12 months as 25,000 new units become available. Adjustments are being made, however, as multifamily building activity in the Dallas-Fort Worth area for the first 9 months totaled 12,606 units, off more than 25 percent from the same period in 1998.

The Houston apartment market is also reporting a high occupancy rate of 95 percent. Active areas for apartments in the Houston area include downtown, the Inner Loop, the Farm Road 1960 area to the north, Stafford to the west, and the NASA area to the southwest. The construction of a mega-mall in suburban Katy to the far west is now generating developer interest in that area as well. In the Houston-Galveston-Brazoria area, multifamily housing permit activity in the first 9 months totaled 8,180 units, less than half the volume at this time last year. The decline is a response to the large pipeline, which has more than 16,000 units under construction.

With the recent expansion of assisted living facilities and more competitive market conditions, a number of developers in the Dallas-Fort Worth area are exploring another niche in the market: independent seniors rentals. These developments are generally less expensive than congregate retirement centers and luxury apartments. Rents would start at approximately $600 for a small, one-bedroom unit. A number of the developments are planned to have LIHTC financing. Amenities are designed for active seniors, starting at age 55, and stop short of providing services for the frail elderly typically found in assisted living communities.

Spotlight on Austin-San Marcos, Texas

In 1998, Fortune magazine ranked Austin as the number one city in the U.S. for business. A recent survey by Money magazine ranked Austin as the second-best big city in the country in which to live. The area's hot economy and housing market reflect these rankings. The unemployment rate for the Austin-San Marcos metropolitan area, which averaged 4.9 percent in 1990, was down to only 2.1 percent in August 1999. Nonagricultural wage and salary jobs increased by 24,500 in the 12 months ending in August 1999, a 4.2-percent increase, compared with 6.1 percent during the same period in 1998.

The area's economic growth is attributed to the high-technology sector. At a recent real estate conference, the top five reasons new companies move to Austin are Dell Computer, Advanced Micro Devices, Samsung Austin Semiconductor, Motorola, and Applied Materials. Dell is the area's largest private employer, with approximately 18,000 employees; Motorola has 10,500, and IBM has 7,500. Software firms of all sizes have also been responsible for a substantial increase in employment, ballooning from 177 firms in 1989 to more than 600 by the end of 1997. Because Austin is the State capital and home to the University of Texas, government and education are also major sources of employment. With more than 20,000 employees, the University of Texas is the area's largest employer. The State, city, and Federal Governments account for 21 percent of the 624,100 nonagricultural jobs reported in August 1999.

Economic growth has caused a population explosion. The five-county metropolitan area's population increased from 846,227 in 1990 to 1,105,909 in July 1998, a 31-percent gain. Since 1990, the population of Travis County, the location of Austin, has grown 23 percent to 710,625. The population of suburban Williamson County, just north of Austin, grew 60 percent between the 1990 census and July 1998 to more than 223,900.

The resulting housing demand has made the Austin area one of the hottest sales markets in the Nation. Existing single-family home sales in the area through August were up 14 percent compared with last year, and condominium sales were up 18 percent from a year ago. Existing sales are on a pace to easily exceed 1998's volume of more than 15,500 homes, the highest level since 1980. As of August there was less than a 3-month inventory of homes available, and the median sales price had increased 5.8 percent in the previous 12 months to $125,300. The new homes market is also booming. In 1998, permits were issued for 10,805 units, the highest level since 1980. This year it is expected to be even higher. Permits for new single-family homes in the first 9 months of 1999 totaled 6,655 homes, up about 3 percent from the same period in 1998.

Rental housing production has barely kept pace with the substantial growth in demand. In the first 9 months of 1999, permits were used for 5,246 multifamily units. Since 1995, approximately 6,000 units a year have come on the market. Apartment occupancy remains high, and it is expected that the market will absorb an additional 6,700 units in 1999. Completions in 2000 will add 5,000 more units. Rents have steadily increased by 3 to 4 percent annually since the end of 1997.