The strong economic expansion continues in the Southwest region. During the 12-month period ending in June 1999, nonagricultural wage and salary employment in the Southwest grew by 2.2 percent, or approximately 305,500 jobs. As expected, Texas continued to grow at the fastest rate, 2.7 percent, with the other States reporting significantly lower rates of growth.

The annual rate of existing sales in the Southwest region, as of the second quarter of 1999, totaled 870,000 homes, a 10.5-percent increase over the same period in 1998. Sales in Texas were up 12 percent to 579,600, and double-digit increases were also reported for Arkansas and New Mexico.

In the Oklahoma City metropolitan area, the loss of approximately 2,400 single-family homes and 1,000 apartments, due to tornadoes on May 3, has had a significant impact on the housing market. The rental market has seen a dramatic increase in occupancy rates, especially in the southern portions of Oklahoma City, as displaced homeowners and renters have sought new housing. The sales market has also been affected. The Oklahoma City Metropolitan Association of REALTORS^® reported that there were more homes sold in June 1999 than any other month in their history. The almost 1,500 sales in June represented a 33-percent increase over the June 1998 volume. The association cited the numbers of homeowners displaced by the tornadoes. The rebuilding is coinciding with a record volume of single-family new construction in the Southwest and the Nation. As a result, local sources report that shortages of building materials, particularly lumber and drywall, and construction trades are affecting the rebuilding effort. The three hardest hit cities in the metropolitan area (Oklahoma City, Moore, and Midwest City) report a big increase in permit activity, as rebuilding efforts pick up steam.

In the first 6 months of 1999, single-family building permit activity in the Southwest region totaled 75,336 homes, up more than 5 percent regionwide. All States recorded increases in activity. Activity in Texas totaled more than 53,400 homes.

Multifamily building permit activity for the first 6 months of 1999 was down more than 20 percent compared with the first 6 months of 1998. Louisiana was the only State to report an increase. In Texas, which typically accounts for 80 percent or more of the region's building activity, activity was down 21 percent as a result of a big drop in the Houston-Galveston-Brazoria area. The decline in the Houston area is a reflection of the unusually large number of units permitted during the first 6 months of 1998, rather than any signal of future trends. Multifamily activity in 1999 in the Austin-San Marcos metropolitan area continues to keep to its pace of approximately 6,000 units permitted annually. Permits were issued for a total of 3,363 units in the first 6 months of the year. Occupancy in most apartment developments is at 97 percent or higher, and the relatively tight conditions and newness of the inventory mean some of the highest rents in the State. The Dallas-Fort Worth Metroplex continues to be one of the most active markets in the Nation for apartment construction. In the first 6 months of the year, permits were issued for almost 8,500 units.

Spotlight on Laredo, Texas

Due to its location on the border with Mexico and at the beginning of Interstate 35, Laredo has benefited greatly from the increased economic activity as a result of the North American Free Trade Agreement (NAFTA). Interstate 35 has become the major inland connector between Canada, the United States, and Mexico. Currently, Laredo's Customs District handles more trade than the inland ports of Southern California, Arizona, New Mexico, and West Texas combined. Mexico's principal highway and railroad, leading from the industrial area of Monterrey and points farther south, converge in Nuevo Laredo on the Mexican side of the border to meet two major rail lines and Interstate 35 on the United States side. In 1998 the Port of Laredo handled 36 percent of total U.S.-Mexico ground-transported trade. Since 1987, the number of U.S.-owned maquiladoras (assembly plants) has more than tripled. There are currently 90 operations in Nuevo Laredo and another 250 plants in other cities to the south.

NAFTA has also led to the development of a growing air freight industry that has made Laredo's airport, a converted Air Force base, the eighth largest handler of Latin American trade in the Nation. A $31 million airport terminal opened in 1998, and the city is hoping to add passenger service. Until NAFTA brought the present boom, Laredo was among the Nation's poorest cities, with low-paying jobs and persistent high unemployment. As a result of the economic growth, unemployment has fallen from 15.3 percent in 1995 to 9.2 percent in 1998, the lowest level of the decade. Since 1995 nonagricultural wage and salary employment has increased at an average annual rate of 5 percent, to 63,800 in 1998. In the 12 months ending in June 1999, employment increased by 2,900 or 4.6 percent over the comparable period 12 months earlier. Most of the new jobs are in services and transportation and public utilities.

The Laredo area's population has boomed as well. As of July 1, 1998, the population of the metropolitan area was 188,166 for an average annual increase of more than 4 percent since 1990. Net natural increase (32,868 persons) accounted for 60 percent of the total increase. The second biggest source of the growth in population is international immigration (17,224 persons), accounting for another 30 percent of the gains since 1990. The city's population stood at 175,783, making it the second-fastest-growing city in Texas behind the Dallas suburb of Plano. The population of Nuevo Laredo is estimated at approximately 650,000.

Single-family activity from 1990 through 1998 has totaled 8,428 homes. Activity in the first 2 years of the decade averaged only 600 units annually. From 1992 through 1995, activity was relatively steady, increasing to an average of 880 units annually. With the boom, activity increased to an average of 1,250 units annually from 1996 through 1998. Activity in 1999 continues at the same pace, with more than 600 units permitted in the first half of the year. Manufactured housing is a significant source of new housing in the Laredo area. In 1998 manufactured housing accounted for 924 units, or 40 percent of the total single-family production in the metropolitan area.

Multifamily housing building permit activity increased steadily from 221 units in 1990 to a high of 1,019 units in 1995. Activity dropped dramatically during the past 3 years. From 1996 through the first half of this year, multifamily activity has averaged less than 175 units annually. Current overall occupancy in apartments is about 97 percent, and 99 percent or higher in newly completed developments.