#20 Killeen-Temple-Fort Hood, Texas
From: BUILDER 2009 Posted on: October 6, 2009 3:02:00 PM
By: Boyce Thompson
Much has changed since February, when we published our first list of the healthiest
housing markets for 2009.
The federal government’s $8,000 tax credit for first-time home buyers
spurred sales around the country. Companies with cash are buying land again.
A handful of builders have begun emerging from Chapter 11 bankruptcy.
But the housing downturn surely is not over yet, despite economists’ assertions
that statistics will show that the recession ended in June. Home values have
fallen dramatically this year, and some believe prices still haven’t hit
bottom. In terms of employment (a key factor for home sales), all but three
of the top 100 housing markets have lost jobs since we published our February
story.
Given these factors, we decided to revisit our list and see how individual markets
have fared this year—and where builders need to be in the months to come.
We took advantage of this occasion to improve the metric by which we rank the
markets by adding more data to the calculations. Now we’re ranking markets
not just by what’s happened with home price appreciation (or depreciation),
job growth, household growth, and unemployment. We’re also considering
median income growth as well.
“These are the economic factors that are most correlated to strong home
sales,” says Jonathan Smoke, director of research for Hanley Wood Market
Intelligence , which compiled the rankings for BUILDER Online. “In the
best of times, earlier this decade, many markets had high marks on all these
factors, making them the perfect markets for home sales.”
Today, as Smoke points out, the reverse is true. In nearly every market, most
of the key home building drivers have turned negative. As a result, virtually
no market today is truly healthy, though some are faring better than others.
For that reason, the recovery, when it comes in earnest, is likely to be more
pronounced in the markets that head our list.
Each market on the list received a Market Health Indicator score, with a score
of 50 or more considered healthy. Only one market on this list surpassed 50.
To give more builders across the country a sense of where an individual market
stands nationally, we’ve expanded the list to include the 100 largest
home building markets, ranked by permit volume. Interestingly, many smaller
markets showed up on our list of the healthiest, in part because they didn’t
have big run-ups in housing appreciation during the boom. Many of them also
benefit from more diversified economies than other formerly booming metros.
We’ve also improved the BUILDER Market Health Index to make it timelier
and more consistent. We’ve included forecasts, where appropriate, so that
all the data, with the exception of building permits, is good through August.
Again, our list should help identify the markets that are likely to recover
first from the downturn. Some are already on their way up. In Washington, D.C.,
for instance, new home sales were up 17% through June, and builders there have
been able to pass through some price increases.
If you would like a broader and more detailed ranking of the top 200 markets,
you can click on this link to purchase the BUILDER Market Health Report from
Hanley Wood Market Intelligence.
Here, in ascending order, are the 20 healthiest housing markets in the country.
Market Health Indicator: 28.7
Home building in Killeen, home to Fort Hood, is down, to be sure. In fact, the
central Texas metro area experienced a 33% decline in building permit activity
during the first half of the year. With an unemployment rate hovering around
7.2%, Killeen has fared better than most markets around the country. Employment
has helped prop up median home prices, which have barely fallen with just a
2.2% decline in the last year. They don’t have far to go, since the median
price of a home here is an ultra-affordable $89,450. Killeen’s relative
health has single-family builders betting conditions will improve. They pulled
12% more permits in the second quarter of the year, compared to a year earlier,
though multifamily permit activity plummeted.
Market Health Indicator: 30.1
Though unemployment woes have arrived in Raleigh, home prices have held steady
during the last year, dropping a mere 1.6%, in part because the city has added
so much population in recent years (roughly 5% growth annually). Builders in
Raleigh, which is home to the Research Triangle, multiple universities, and
the state capital, have successfully pushed entry-level housing this year, taking
advantage of the $8,000 federal tax credit. Raleigh added more households on
a percentage basis than any other top 20 city on the list in the last year.
Existing home sales in August were running only 1% below levels of a year earlier.
As a result of the market’s relative strength, median home prices--$218,000
in August—were holding up well compared to other parts of the country.
Market Health Indicator: 30.3
During the first eight months of the year, the economic recession finally caught
up with Fayetteville, which dropped several notches in our rankings. Located
in the foothills of the Ozarks and within an easy drive of WalMart’s Bentonville,
Ark., corporate headquarters, this metro has recently been named one of the
best places to live (by Kiplinger) and to do business (by Inc.). During the
first nine months of the year, employment declined just 1.1% and median household
income slipped only 2.3% compared to the same period a year earlier. Unemployment
here (6.4%) is still well below the national average, and median home prices
are a very affordable $106,000. Bentonville, which accounts for about half the
activity in the MSA, is also the hottest part of the market, thanks to a flurry
of multifamily activity.
Market Health Indicator: 30.5
Home to Brigham Young University and great skiing, fundamentals in Provo have held up better than most during the housing recession, due in part to strong in-migration to this metro during most of the decade. Even so, with Moody's Economy.com expecting less than a thousand permits to be pulled here this year, Provo is operating at about 20% of the production it maintained in the 2005-2007 period. Housing prices in Provo, which seemed to escape deflation during much of 2007 and 2008, finally fell 18.4% during the first nine months of 2009. Foreclosures are certainly a factor; Provo has the highest foreclosure rate in Utah, which itself has one of the higher foreclosure rates in the country.
Market Health Indicator: 30.7
Little Rock is rockin’ the recovery. Moody’s Investor Services recently
announced this Arkansas city has the second most diverse economy in the nation.
An Associated Press report in August named Little Rock as a “resurgent”
Southern market, thanks to a 5% increase in existing home sales in July, data
that came from the Arkansas Realtors Association. The next month the group reported
that existing home prices rose 8%. Job losses haven’t increased much during
the year in Fayetteville, which also benefits from a very affordable median
existing home price of $126,000. Still not convinced? Try this: Little Rock
was ranked by the Brookings Institute as the seventh-best metro economy in the
country this year, with the second-best overall growth from 2008 to 2009.
Market Health Indicator: 31.1
The recession settled into Charleston this year, as unemployment nearly doubled
to 11%. This happened even as the attractive port city continued to add population
at a 2% annual rate. Home prices, which held pretty steady in 2008, took a tumble
this year, falling 10.9% during the first nine months of 2009. At $180,000,
the median price of an existing home is now below 2004 levels. Rising joblessness
has led to a 33% decline in permit activity through June of this year. Even
so, the city’s long-term prospects have to be considered good. Two of
the four biggest employers here are military bases, and the health sector accounts
for the other two. Busiest builders: Centex Homes, KB Home, The Ryland
Group, Beazer Homes USA, Lennar Corp. Courtesy: Hanley Wood Market Intelligence.
Market Health Indicator: 32.4
While other housing markets have swung to extremes in recent years, a strong
and diversified economy has helped Omaha remain steady during the last nine
months. Median home prices remained in the mid-$130,000s in the 2nd quarter
of 2009, not far from where they stood during the housing “boom.”
One of the biggest beneficiaries of Omaha’s stability has been its biggest
builder, HearthStone Homes , which hopes to equal in 2009 the 882 single family
closings it achieved in 2008. The company has benefited from a four-year contract
(which ends next year) to build homes at Offutt Air Force Base. With about 11,000
employees, Offutt qualifies as the single biggest employer in Omaha. The most
famous firm with an Omaha office? Warren Buffett’s Berkshire Hathaway
holding company, which owns Johns Mansville and Shaw Industries, among others.
Busiest Builders: HearthStone Homes, Celebrity Homes, Charleston Homes,
Lane Building Corp., Barr Homes. Courtesy: Hanley Wood Market Intelligence.
Market Health Indicator: 32.5
People are still moving to Denver, which remains a place where many people would
like to live. The city’s popularity has helped keep median home prices
at a rather lofty $179,850, which is still down 15% in the last year. Jobs certainly
aren’t the main draw; unemployment in the Denver metro area stands at
9.4%. Such trends have forced builders to respond with new product offerings.
While Arcadia Properties has seen success with an infill project, most of the
leading builders in Denver have introduced smaller, more affordable homes to
compete with foreclosures, which have steadily declined during the last year.
Busiest builders: Richmond American Homes, D.R. Horton, Oakwood Homes,
KB Home, Century Communities. Courtesy: Hanley Wood Market Intelligence.
Market Health Indicator: 32.8
With many economists suggesting that unemployment will continue to rise into
2010, Des Moines boasts an unemployment rate of 5.5%, half the national number
and the lowest among its fellow 20 healthiest housing markets. The top two employers
here are financial institutions Wells Fargo and Principal Financial Group, and
this sector of the economy contributes about a quarter of the region’s
income. With a median existing-home price of about $140,000, prices are still
running at 2004 levels after hitting a high-water mark of $152,000 last year.
Des Moines had the best growth rate among all metropolitan economies during
2008-2009, according to The Brookings Institution. But that didn’t stop
building permit levels from dropping 42% during the first half of the year.
Market Health Indicator: 33.0
Madison is another one of those markets lucky to be the state capital and have
a major university, the University of Wisconsin. Together, these businesses
have helped keep unemployment at a low 7.4% through August 2009. One of the
fastest growing portions of Wisconsin, the Madison MSA had an estimated population
of 562,000 in 2008. It also has one of the most educated workforces in the nation,
and consistently ranks among the best places to live and work in the country.
Even so, 2009 permit levels in Madison are running at half of 2008 rates, thanks
to a big slide in multifamily activity. The median home price, which dropped
5.9% in the first nine months of the year, currently stands at $211,000.
Market Health Indicator: 33.3
With a population of nearly a quarter million, Olympia is one of the smallest
of the top 100 markets. But the state capital, located about 60 miles from Seattle,
is also among the strongest. Olympia’s housing correction has been a mild
one; at $184,000, existing home prices remain above 2004 levels. Even so, a
state government hiring freeze, enacted in 2008, has curtailed employment here,
and the unemployment rate is now running at 9.9%. Though new households are
still forming, median income levels have fallen 8.5% during the last year. Olympia
also happens to be the home of Scott Homes, named Builder of the Year by the
NAHB Research Center for its work building energy-efficient homes.
Market Health Indicator: 34.2
Though Dallas is now shedding jobs—it managed to increase them last year because of its attractiveness as a business center—home prices here have held steady; they are down less than 6% year-over-year. Because builders have refrained from building speculative inventory, local housing forecasters believe the housing market seems to have reached bottom. With the median price of a home holding at $135,000, Mark Dotzour, chief economist at the Real Estate Center at Texas A&M University, believes that there isn’t much risk of further price decline. David Brown, of housing analysis firm Metrostudy, added that there’s only a three months’ supply of new homes left in this major housing market. Busiest builders: D.R. Horton, Highland Homes, Centex Homes, David Weekley Homes, Meritage Homes. Courtesy: Hanley Wood Market Intelligence.
Market Health Indicator: 34.3
With a relatively low unemployment rate of 6.3%, resilient resale pricing, and strong population growth, Salt Lake City hasn’t felt the same pain as other markets. Even so, Salt Lake, which is home to the University of Utah, has lost some jobs during the last nine months, mostly in construction. Existing home prices, which were $212,000 in September, didn’t decline much during the downturn; they still run above 2006 levels, propped up by strong household formation. Interestingly, 75% of the permit activity during the first half of the year in Salt Lake has been in multifamily, reversing a four-year trend in this past Olympic host city. Busiest builders: Ivory Homes, Richmond American Homes, Woodside Homes, Garbett Homes, Trophy Homes. Courtesy: Hanley Wood Market Intelligence.
Market Health Indicator: 36.4
Though Tulsa largely avoided the housing bubble, this Great Plains market has
not escaped the recession. As Tulsa lost jobs in manufacturing, energy, and
other sectors, new-home construction slowed. Construction starts were off 29%
during the first eight months of the year compared to a year earlier, according
to local reports. But with unemployment a low 7.2%, and housing prices a very
affordable $128,000 (down only 3% in the last year), Tulsa appears poised to
recover before many other markets.
Market Health Indicator: 38.6
For a short time following Hurricane Katrina, Baton Rouge became the largest
city in Louisiana. Since then, many of those temporary residents have moved
back to New Orleans, but the metro area’s housing market has remained
in decent shape. A port city that is home to the second largest oil refinery
in the country, Baton Rouge is also the state capital and home of Louisiana
State University (LSU). Its strong and diversified employment base has contributed
to a jobless rate of only 6.7%. It is one of only three top 100 markets to have
added jobs during the first nine months of the year. Permits, though, are off
46% during the first six months, with most of the decline in multifamily.
Market Health Indicator: 38.7
In Oklahoma City, another oil patch market that never hit pay dirt in housing,
the median price of an existing home is $126,000, the lowest of the top 10 markets
on this list. Home prices in Oklahoma City, which is situated in the middle
of an oil field, have barely budged in the last year. The city has even seen
the development of loft and condominium projects. Though Oklahoma City, which
houses both the University of Oklahoma and Tinker Air Force Base, has shed some
jobs in the last nine months, its unemployment rate, 6.45%, stands well below
the national average. Finally, foreclosures haven’t been the problem in
Oklahoma City that they have been in other markets. Busiest builders:
Ideal Homes of Norman, Home Creations, D.R. Horton, Rausch Coleman Homes, Sooner
Traditions. Courtesy: Hanley Wood Market Intelligence.
Market Health Indicator: 39.3
Inexpensive labor and land costs have always made Houston an extremely affordable
housing market. Even so, softness in the energy sector put a dent in Oiler country
this year. The city lost 2.6% of its jobs in the first nine months of the year,
compared to a similar period last year, though its unemployment rate, 7.8%,
remains below the national average. Though building permits are running 46%
below last year’s levels through June, activity picked up in August compared
to the prior year, according to David Jarvis, director of Metrostudy’s
Houston region. At a recent housing forecast conference, Jarvis predicted that
permits would be up in the second half of the year on a year-over-year basis.
Busiest builders: Lennar Homes, Perry Homes, Long Lake, Ltd., MHI/McGuyer
Homebuilders, and David Weekley Homes. Courtesy: Hanley Wood Market Intelligence.
Market Health Indicator: 40.2
Washington, D.C., is one of the few major markets to actually record an increase
in new home sales this year; sales were up 17% through June, according to Hanley
Wood Market Intelligence, though the market slowed in September. The federal
government appears to be living up to its reputation as a counter-cyclical buffer,
though many of the jobs in the nation’s capital are now in the tech sector.
Home prices in this high-priced region seemed to correct early. Median home
prices fell 20% in 2008 and have fallen another 21% through September of this
year. But in a research note, market researcher Dan Fulton recently asserted
that home prices probably won’t decline further. In his opinion, Northern
Virginia doesn’t have enough housing, while Maryland's Prince George’s
and Charles counties continue to suffer from oversupply. Washington qualifies
as one of the most affluent markets in the country with a median income of $83,500.
Busiest builders: Ryan Homes, Centex Homes, K. Hovnanian Homes, Beazer
Homes, The Ryland Group. Courtesy: Hanley Wood Market Intelligence.
Market Health Indicator: 41.2
The recession arrived in San Antonio earlier this year, when employment finally
turned negative due to weakness in the manufacturing sector. But with military
bases as three of its top four employers, this Texas city may see better employment
numbers next year, potentially fueling housing growth. Housing here remains
affordable at a median of $148,000, with prices declining a mere 1.6% during
2009. In addition, San Antonio routinely ranks among the best cities for relocation,
and has been gaining population at a rate of 2.8% annually, a trend that continued
even this year. Despite favorable trends, though, San Antonio housing permits
have fallen 54% so far this year, and comparisons may wind up even lower before
the year is over. A full 72% of the action is in single-family rather than multifamily
permits. Busiest builders: D.R. Horton, Centex Homes, KB Home, Fieldstone Communities,
Pulte Homes. Courtesy: Hanley Wood Market Intelligence.
Market Health Indicator: 50.3
Even though it took a step backward during the last six months, Austin happens
to be the only market on our list that is genuinely close to healthy. Home prices,
which rose in 2008, finally declined this year—they are down 4.6% through
September—as this Texas metro ended a long run of employment growth and
lost some jobs. But its population has expanded by 4.3% during the first half
of 2009, which should add housing demand and help firm up home pricing. It was
the same story with Austin-area employment numbers, which remained in positive
territory until mid-2009, when its manufacturing segment began losing jobs.
Still, unemployment in this progressive city runs only about 7%, significantly
below the national average. Dell Computer is Austin’s largest employer,
with about 17,000 jobs. Austin continues to draw population, especially retirees,
with its low cost of living, inexpensive housing, and warm-weather climate.
The city had the third highest household growth rate in percentage terms among
the top 100 market. Even so, permit activity fell by 38% during the first half
of the year. Busiest builders: D.R. Horton, Centex Homes, Pulte Homes,
Lennar Homes, KB Home. Courtesy: Hanley Wood Market Intelligence.