Nonagricultural wage and salary employment in the Southwest region grew by 3 percent in the 12-month period ending in June 1998. The region added almost 415,000 new jobs during this period, with the services sector accounting for more than 40 percent of the gain. The significant job growth was powered by a 3.4-percent increase in Texas. Oklahoma and Louisiana both registered healthy rates of employment growth of 3.1 and 2.6 percent, respectively. More moderate job increases were reported in New Mexico, at 1.5 percent, and Arkansas, at 2.1 percent. The unemployment rate in the region stood at 5 percent as of June 1998, with Oklahoma reporting the lowest rate, 4 percent, and New Mexico the highest, 6.7 percent.

During the first half of 1998, residential building permits were issued for a total of 105,415 units in the Southwest, a 22-percent increase over the same period in 1997. Increased single-family activity was reported in every State. Multifamily activity for 1998 through June was up 40 percent in Texas to 27,424 units. Activity in Oklahoma during the first half of 1998 totaled 2,353 units, up 35 percent. Declines were reported in Arkansas, Louisiana, and New Mexico.

Strong new and existing home sales are being reported throughout the region as well. In the Oklahoma City area, sales for May 1998 were up 6 percent compared with May 1997. In Tulsa, sales were up 14 percent during the first 5 months of 1998 compared with the first 5 months of 1997. Sales in Texas were up 16 percent for the first 4 months of 1998 compared to the same period in 1997. Brazoria County in suburban Houston had the highest increase, at 69 percent. Sales were up 26 percent in Austin, 23 percent in Dallas, 19 percent in Houston, and 12 percent in San Antonio. The median sales price in Texas increased 5 percent during the same period.

A significant part of the increase in multifamily housing in Texas can be attributed to specialized care homes for senior citizens. Texas leads the Nation in the production of such facilities, with 5,879 units in 60 properties currently under construction. Much of the recent activity has been in assisted-living centers. As of April 1998, the San Antonio area alone had 82 licensed personal care facilities and another 26 institutions with applications pending. The large increase in new applications has forced some facilities to wait up to 6 months after construction completion to receive their State license to operate.

Rental housing market conditions remain strong in Texas' major markets. In the Austin area, new apartments continue to be absorbed at a fairly rapid pace. Capitol Market Research reported that apartment occupancy in June 1998 was nearly 96 percent, up from 93 percent in June 1997. Rents increased an average of 3.7 percent over the 12-month period. Dallas-area apartment occupancy is also reported to be higher than 95 percent, with occupancies slightly lower in neighboring Fort Worth and Arlington. In Corpus Christi, occupancy rates are in the 94-percent range.

More than 1,900 new apartment units are in the pipeline in the Little Rock, Arkansas area and several hundred additional units are in the preliminary planning stages. This amount of construction, coupled with modest job growth, has real estate experts concerned about possible overbuilding.

The rental housing markets in both the Oklahoma City and Tulsa areas are considerably improved. In Oklahoma City, 1,500 new multifamily units have been completed during the past 2 years, 1,300 are under construction, and at least 1,600 more units are in the planning stages. Absorption of the new units has been strong, with the typical 300-unit property leasing at a rate of 25 to 30 units monthly. The improvement in the apartment market in Tulsa began 3 years ago. Since then, approximately 2,400 multifamily units have been completed (including 920 units with LIHTCs). There are currently 900 units under construction and an additional 1,400 units in the planning stages. The typical new property is reporting a lease-up rate of 30 to 35 units monthly. Some new properties have been able to raise rents 6 to 7 percent after initial occupancy.

Spotlight on Houston, Texas

Although Harris County experienced the greatest absolute population growth (339,994 persons or 12 percent) between 1990 and 1997, the suburban counties of Fort Bend to the west and Montgomery to the north reported phenomenal growth rates during the same period of 43 and 42 percent, respectively. Since 1989 Houston-area employment has increased at an average annual rate of 2.7 percent for a total gain of more than 353,000 jobs. Despite the tight labor market, employment grew by 4.7 percent, or 77,900 jobs, during the 12-month period ending in May 1998. Approximately 60 percent of Houston's primary employment base is petroleum related, and more than 5,000 petroleum-related companies are located within a 100-mile radius of the city. The Texas Medical Complex (TMC) is the largest medical complex in the world and the Houston area's largest single employer. With nearly 55,000 employees, TMC contributes an estimated $4 billion directly to the local economy and more than $10 billion indirectly. Although the Dallas area is headquarters to more Fortune 500 companies and San Antonio has its special cultural ties to Mexico, Houston has longstanding international ties, particularly in the petroleum and medical sectors. A large number of foreign consulates and numerous foreign-owned companies have offices in the area, including 112 companies from Japan alone.

The metropolitan area is among the top 10 homebuilding markets in the Nation. In 1997, single-family permits totaled 17,936 homes, exceeding the previous record high of 16,482 in 1996. The booming economy has fueled the strong demand for new homes. In the first 6 months of 1998, permits were issued for 11,551 single-family units, a 29-percent increase over the volume during the same period in 1997. Homebuilding activity continues to be concentrated in the fast-growing areas of Fort Bend County, Montgomery County, west and northwest Houston, and the NASA/Clear Lake area to the southeast.

In 1997 Houston was the fourth-largest producer of multifamily housing in the Nation, with 11,167 new units permitted compared with only 4,394 in 1996. In the first half of 1998, the area led the Nation in multifamily activity, with permits issued for 11,217 units.

As a result of all this activity, recent studies estimate that developers will add between 14,000 and 16,000 apartments to the inventory in 1998. Most of the units are high-end rentals with rents averaging between $ 0.90 and $1.40 per square foot. As of January 1998, more than 9,000 apartment units were under construction and 3,483 units were undergoing renovations. In addition, 9,800 units in 43 developments were in the planning stages. The sought-after homebuilding areas are also popular with apartment developers. Other active areas include downtown Houston and areas to the south and west of downtown. Almost one-third of the current multifamily construction is retirement housing, including a number of assisted-living facilities.

The overall apartment occupancy rate in Harris County as of year-end 1997 was higher than 95 percent. Apartment absorption at year-end 1997 continued to rise over the previous 6 months, with 5,180 units absorbed. Rental rates rose a modest 2.2 percent. Premium areas inside Loop 610 near downtown Houston continued to report the highest rents, at an average of $754 per month.