Nonagricultural wage and salary employment growth in the Southwest averaged 2.3 percent in the 11-month period ending November 1997, supported by continued healthy growth in Oklahoma at 2.8 percent and Texas at 2.6 percent. Skilled labor shortages continue to plague the energy and high-technology industries. The Oklahoma City and Tulsa metropolitan areas have had 10 consecutive years of employment growth, representing an unmatched level of stability in historically volatile economies.

Since the start of the current national economic expansion in 1991, Texas' Gross State Product has grown an average of 3 percent per year. This expansion has been fueled in part by computer and electronics production. During the past 5 years, statewide employment in electrical and nonelectrical machinery manufacturing rose by 21 percent. Texas exports of computers and electronics totaled $29.9 billion in 1996, accounting for more than 40 percent of Texas' total exports.

Single-family homebuilding in the Southwest region in 1997 was slightly off the record pace of 1996. Permits were issued for 116,266 single-family homes, down 3 percent from 1996 levels. Activity in Texas declined less than 1 percent to 80,574 units. The continued strong showing in 1997 is due in large part to permits in the Dallas-Fort Worth Metroplex, which totaled 26,217 units, 3 percent above 1996. Activity in the Houston-Galveston area totaled 20,890 units for the year, an increase of 8 percent. The Austin- San Marcos area, however, reported a 16-percent decline in single-family permits for the year, reflecting slower employment growth and increased building restrictions. Existing home sales in the Southwest in 1997 set a record for the 1990s with sales of 499,400 homes. Sales were up in every State but New Mexico. Reflecting the strong demand in Dallas, Fort Worth, and Houston, the median sales prices were up 8, 6, and 7 percent, respectively.

Manufactured housing is a significant source of new housing in the Southwest region. In 1997, shipments to dealers in the region totaled 68,969 units. Manufactured housing shipments through December in Oklahoma totaled 7,017 units compared with 8,079 single-family permits during the same period. Shipments to Louisiana in 1997 totaled 9,864 units, nearly 80 percent as many as the single-family permit total. Shipments to Texas totaled 37,154 units, the most of any State in the Nation.

Apartment construction continued to increase throughout the Southwest in 1997. Building permits were issued for 55,173 multifamily units, up 21 percent from 1996 and a record for the 1990s. All States but Louisiana reported increases. In Texas the number of units permitted increased 24 percent on the strength of substantial gains in the Dallas-Fort Worth and Houston-Galveston areas. Both markets are in the top five nationally in multifamily construction. Activity in the Dallas-Fort Worth area was close to 17,800 units, a 32-percent gain over 1996. However, the Houston-Galveston area reported 11,561 units, more than 250 percent more than its 1996 volume. The substantial increase is a result of increased employment growth; rents that have finally reached levels that will support new construction; and increased demand, particularly for units inside Loop 610.

Most of the region's rental markets have remained balanced as the large supply of new units entered the market. An exception is New Orleans, where new apartment developments in both the city and the suburbs are experiencing difficulties with absorption. The occupancy rate for apartments in the metropolitan area is 92 percent and it is even lower, 88 percent, in the city of New Orleans. The rental markets in Austin, Dallas-Fort Worth, and Houston continued to show strong demand. According to Capitol Market Research's December 1997 Apartment Market Survey, apartment occupancy rates in Austin rose from 93 percent in June to 95 percent in December as the area absorbed more than 4,600 units in 1997. Apartment occupancy in Dallas-Fort Worth and Houston remained above 95 percent as of the third quarter of 1997.

Spotlight on San Antonio, Texas

In 1996 San Antonio surpassed Dallas to become the second-largest city in Texas and the eighth-largest city in the Nation. Its population of 1,067,816 is an increase of 11.3 percent from 1990 to 1996. The city's growth is attributed to annexations of new subdivisions and to immigration. The San Antonio metropolitan area includes Bexar, Comal, Guadalupe, and Wilson Counties and had a population of about 1.5 million as of July 1996, an increase of 12.5 percent since 1990.

The economy of the San Antonio metropolitan area has expanded at a steady pace since the late 1980s. Employment is supported by strong trade and service sectors, a large tourist industry, and five large military installations. Medical research, biotechnology, and higher education are also major factors in the local economy. For the 11 months ending in November 1997, nonagricultural employment averaged 648,600, an increase of 15,700 jobs (2.5 percent) over the first 11 months of 1996. Although more than 100,000 jobs have been created in San Antonio since 1992, most are in the service sector, many at telephone company call centers and tourism-related businesses.

The U.S. Department of Defense remains the area's largest employer, with more than 42,000 military personnel and 32,000 civilian employees as of January 1, 1998. However, Kelly Air Force Base (5,300 military and 14,600 civilian employees) is scheduled to close by 2001. Part of Kelly's operations will merge with the adjacent Lackland Air Force Base, preserving approximately 8,600 military and civilian jobs. A substantial number of the cuts in civilian jobs will be through retirements. As a result, the closure is not expected to cause any major, long-term disruption to the San Antonio metropolitan area housing market. Ownership of Kelly is now shared by the Federal Government and the publicly funded Greater Kelly Development Corporation (GKDC), but sometime after 2000 the development corporation will begin making installment payments to purchase the installation.

In 1997 GKDC launched an effort to raise funds for improvements to Kelly's infrastructure, with the goal of turning the base into an airplane- engine repair center and large-scale truck stop for freight between the United States and Mexico. Some successes have already been achieved at the base, including an aircraft-engine maintenance facility and a prototype North American Free Trade Agreement trucking terminal where trucks will stop to fill out forms for the U.S. Department of Customs on their way to Mexico. Financing to fund the conversion is contingent on GKDC's ability to secure a lease from the Boeing Company.

The level of homebuilding in the San Antonio area has been relatively stable during the past 4 years. Since 1994, single-family building permits in the area have averaged 6,300 units annually. New home sales in 1997 decreased slightly, to 6,058 homes from 6,303 in 1996. The median sales price for existing homes increased from $84,900 in 1996 to $86,800 in 1997, according to the San Antonio Board of REALTORS^®.

In response to the more competitive rental market conditions, particularly in newer developments, multifamily housing construction activity in 1997 fell 21 percent to 2,140 units. As of January 1, 1998, occupancy in apartments completed since 1990 was only 84.5 percent. According to a 1998 forecast of construction and absorption of multifamily housing presented at the 1997 San Antonio Investment Real Estate Symposium, 2,740 multifamily units are expected to be completed in 1998 and 2,450 units are expected to be absorbed. These projections would mean another drop in occupancy in 1998.