Expectations for a quick recovery in the Southwest region economy lessened with release of recent employment estimates. During the 12 months ending September 2002, moderate gains in Oklahoma, New Mexico, and Louisiana only partially offset losses in Texas and Arkansas. The region’s job total declined by 69,000 jobs (0.5 percent) compared with the previous 12 months. Job losses were led by declines in the manufacturing sector, followed by decreased activity in transportation, utilities, and trade. Oklahoma’s 10,000 new jobs marked the largest increase in the region, but a loss of 83,200 jobs in Texas, including 58,200 manufacturing jobs, overwhelmed this modest gain. The region’s major metropolitan area office markets are also facing difficulty. The vacancy rate for office space in Dallas is close to 25 percent, and space coming on the market in Houston and Austin could push rates in these markets to similar levels.

Residential construction activity remains a strong sector in the region’s economy, but the future impact on a number of local housing markets is uncertain. Single-family permits for the region during the first three quarters of 2002 increased 8 percent over the first three quarters of 2001. Multifamily activity is a surprising 26 percent ahead of last year’s pace. All States posted increases in multifamily building permit activity during the first three quarters of 2002. As new units have been completed in increasingly competitive markets, occupancy rates in some of Texas’ largest metropolitan areas have declined to close to 90 percent by the end of September. Management companies are offering rental concessions, trips, and cash bonuses to keep occupancy from dropping.

Despite the loss of 24,000 jobs in the Dallas-Fort Worth area over the 12 months ending September 2002, existing home sales volumes in Dallas have changed little from last year, but prices have declined 1 percent. On the other side of the metropolitan area, Fort Worth, with some job gains earlier in 2002, has recorded record home sales. Apartment occupancy in the Dallas-Fort Worth area declined to 91.2 percent, 2.6 percentage points below September 2001. Average rents also declined 2 percent from a year ago. Fort Worth’s rental market has fared slightly better than the Dallas rental market. Multifamily construction in Fort Worth increased in 2002, but total production remains well below the levels in Dallas, where more than 7,000 units are under construction.

Nonagricultural employment during the first 9 months of 2002 in the Oklahoma City area increased by only 2,100 jobs compared with the same period last year. The decreasing rate of employment growth has not yet dampened the rate of residential construction. Existing home sales in the Oklahoma City area were 8 percent ahead of the total for the first three quarters of 2002. The average sales price of $113,000 for the period was 4 percent higher than a year ago. The Oklahoma City rental market remains relatively balanced, with the current occupancy rate near 93 percent. The market should continue to perform near its current level into 2003 because only 700 units are in the pipeline.

Tulsa employment has been surprisingly stable despite some high profile employment losses at Williams Companies and WorldCom. The Greater Tulsa Association of REALTORS^® reports that sales of existing homes through the third quarter were only slightly behind record sales for the same period in 2001. The average sales price of $125,000 is virtually unchanged from last year. This represents a departure from the 4- to 6-percent increases noted for comparable periods over the past several years. A slight oversupply exists for homes priced above $250,000. Listings exceeded 6,000 at the end of September, the largest number in at least 5 years. Apartments are exhibiting some softness. Average occupancy, as reported by CB Richard Ellis Oklahoma, stood at 92 percent at midyear, down from 93.5 percent a year ago. Occupancy in newer, higher rent class A properties has been adversely affected by residents who have moved out to buy homes and remains below the rate for the overall market.

Currently there is no indication of how Austin’s economy will respond to the recent dramatic changes in the area’s high-technology industry. The current downturn has been significant; the unemployment rate climbed from a tight 1.7 percent in December 2000 to a peak of 6.0 percent in June 2002. The September 2002 rate of 5.5 percent is down but remains well above the low rates typical of the Austin area throughout the 1990s. Apartment occupancy has declined from 97.5 percent at the end of 2000 to 91.6 percent by the end of the third quarter of 2002. With the construction of 3,000 units started in the third quarter, market conditions are expected to be very competitive for some time. Existing sales have dropped 6.5 percent, and inventories have increased.

A full recovery remains elusive but New Orleans’ hospitality industry has improved. Despite the slower economy, the New Orleans Board of REALTORS^® reports that the average sales price in the metropolitan area during the first 9 months of 2002 was up to $145,034, a 7.5-percent gain compared with the same period in 2001. Sales activity increased 3.5 percent compared with a year ago. Condominiums account for 10 percent of total housing, typically priced from $150,000 to $400,000 for new or refurbished units and $50,000 to $100,000 for older units. The rental market in the metropolitan area was balanced during the summer, and the 93.2-percent occupancy rate as of July 2002 was only slightly below last year’s rate. Occupancy was slightly lower in the city of New Orleans; the 92.5-percent rate there was down from 94 percent last year. In the past 12 months area apartments have experienced minimal rent increases and a modest decline in occupancy, a result of the addition of 1,000 new upscale units and slower than anticipated absorption.