The Southwest region maintained a steady 2-percent rate of employment growth for the 12-month period ending August 2000, down from 3.1-percent growth 1 year ago. Both Texas and Arkansas reported a growth rate of 2.4 percent. Employment in New Mexico and Oklahoma grew by 1.8 percent, and Louisiana grew by only 0.7 percent. The service sector is driving employment gains, accounting for more than 60 percent of new jobs, or 174,700 workers. The trade sector added 84,500 jobs, and government employment increased by 53,900 jobs. The construction boom spurred the creation of another 35,700 jobs in the 12-month period, more than offsetting the loss of 18,200 jobs in manufacturing. The economy of the Dallas-Fort Worth area continues to grow at a strong pace. Nonagricultural employment increased by 86,800 new jobs (3.3 percent) in the 12-month period ending August 2000.

For the first 9 months of 2000, residential building permit activity in the Southwest was mixed. Although single-family permits were down in Oklahoma, New Mexico, Arkansas, and Louisiana, Texas recorded a 5-percent increase. Multifamily building permit activity for 2000 continued to decline, down 35 percent to 27,659 units in the first 9 months of this year. Activity in Texas dropped 33 percent to 22,283 units.

Based on sales volume data from NAR through the third quarter, sales volume in the Southwest region for the first three quarters of the year is down 2 percent, but sales still exceeded 800,000 homes. Sales in Texas are off only 1 percent. In Louisiana, local sources report that the average sales price for single-family homes sold in the first three quarters of 2000 was up only 1.5 percent. Between the third quarter of 1999 and the third quarter of 2000, NAR data indicate that median sales prices for existing homes increased by 3.9 percent in New Orleans to $113,400.

According to American Metro/Study Corporation, home sales and single-family housing starts in the Dallas-Fort Worth area in the third quarter of 2000 exceeded all previous third quarter records. Sales during the quarter totaled 8,420 homes, and construction started on more than 9,270 homes. Analysts believe that the stock market gyrations and higher interest rates have cooled the Austin sales market. Home sales were down 7.6 percent for the 3-month period ending August 2000 versus the same 3-month period in 1999, and homes are no longer selling at a premium. However, with only a 2.6-month supply of homes on the market, Austin is still a seller's market. The 3,193 single-family permits in the Oklahoma City metropolitan statistical area (MSA) for the first 9 months of 2000 is 24 percent below the 4,185 permits issued for the same period 1 year earlier. The decline is actually a return to normal construction levels that were inflated in the summer and fall of 1999 by the construction of replacement units for the more than 2,000 homes destroyed in the May 1999 tornado.

Rental housing market conditions in the Dallas-Fort Worth area are balanced. In the third quarter, Dallas-Fort Worth area apartment occupancy averaged 95 percent. However, in a number of newly completed luxury developments, apartments are not commanding the rents envisioned by their investors; in fact, rent concessions of 1 or 2 months are common. New condominiums are again taking a portion of the high-end market, especially near downtown Dallas. Multifamily permit activity has declined by 50 percent in the first 9 months of 2000 to 6,235 units, but more than 15,000 units remain in the construction pipeline.

The Austin rental market remains tight with an occupancy rate of 97 percent, unchanged over the past 6 months. In Baton Rouge, a rental occupancy survey by Louisiana State University in the spring of 2000 found that 95 percent of apartment units were occupied, and rents were up 3.5 to 4 percent over the previous year. New Orleans' employment slowdown has led to a slight reduction in apartment occupancy to 93 percent and very small rent increases in the first three quarters of 2000.

The rental market in Tulsa has become more competitive this year. According to David Forrest, vice president of CB Richard Ellis/Oklahoma, monthly rents for recently completed two-bedroom units in the Tulsa market have declined an average of $7, or 1 percent, since the beginning of the year. Overall occupancy is unchanged for the past 6 months at 93 percent. However, with little to no new units in the pipeline, and the costs of homeownership increasing, occupancy and rents are expected to rise during the coming months.

Spotlight on San Antonio, Texas

The economy of the San Antonio metropolitan area grew at a healthy but slower rate during the 12 months ending August 2000. Nonagricultural employment increased 2.6 percent, or 18,200 jobs, to 714,700 workers, compared with a 3.2-percent increase in the 12 months ending August 1999. The unemployment rate as of August was 3.6 percent. All sectors of the economy recorded increases except for government.

The drop in government employment reflects the continued phasing out of military operations at Kelly Air Force Base, once the city's largest employer. San Antonio created the Greater Kelly Development Corporation in January 1996 to redevelop the base with the goal of creating 21,000 jobs by 2006. During 1999, Lockheed Martin signed a lease for 1 million square feet, becoming a major tenant along with Boeing and Ryder.

Despite the reduced impact of military employment, the San Antonio economy continues to expand due to growth in the healthcare and telecommunications sectors. A recent study sponsored by the Greater San Antonio Chamber of Commerce found that healthcare is now the largest industry in the area, with an economic impact of nearly $7.5 billion in 1999, compared with $4 billion for tourism. The telecommunications industry also continues to expand. West Telemarketing recently announced plans to nearly double its workforce, adding as many as 3,000 new employees. Quest Communications also announced plans for hiring 1,000 people. A recent merger of SBC Communications with Chicago-based Ameritech could generate as many as 1,000 new jobs in the next year. Expansions in healthcare and telecommunications industries have meant an increase in higher paying jobs for the area, compared with the lower paying jobs in the tourism industry.

The strong economy and gains in high-paying jobs have supported home sales. However, the competition resulting from a large number of builders in the market has allowed prices to remain relatively affordable. Sales activity has increased steadily since the mid-1990s. Existing home sales in 1999 totaled more than 15,000, and the median price of an existing home rose to $88,900. This year is expected to be even better. By August 2000, sales were already at 10,600, up 1.7 percent over the same period in 1999. New home sales are still strong in 2000 but are slower than they were last year. The Regional Director of American Metro Study said that sales are down 10 percent this year due to the increase in interest rates and building costs, which has limited production of homes under $85,000. Sales volume for the year is expected to finish approximately 10 percent below last year's volume. For the first 9 months of the year, permits were issued for 6,131 single-family homes, down 7.3 percent from the same period in 1999.

In 1999, multifamily housing permits were issued for more than 5,000 units, which is more than twice the average for the previous 6 years. Local sources attributed the substantial increase to two factors. By 1999, the market for new units was strong, and with relatively low interest rates and costs of construction, a lot of deals became feasible, even with San Antonio's relatively lower rents. Another cause was the flooding in 1998. As a result, the city redid its planning department review process, adding 3 months or more to the permitting process. As a result of the new process, plans for some projects had to be redone, and the longer processing times pushed many projects into 1999.

So far this year, permit activity has fallen dramatically, and through September, only 1,667 multifamily permits were issued. The 3,900 new apartment units that came on the market in the past 12 months, much of them in high-end developments in north-central San Antonio, have been absorbed, and the apartment occupancy rate in the metropolitan area remains unchanged. The occupancy rate for apartments is now 94 percent. In the first 6 months of 2000, construction started on 1,525 apartment units. As these additional units come on the market during the typically slower fall and winter months, occupancy rates are expected to fall somewhat.