Southern Exposure

Abstract:

This month, we feature two Southern markets that rank among the 13 largest in the country.

Byline:

John Burns

Publication Date:

Tue, 2006-01-31 18:00

This month, we feature two Southern markets that rank among the 13 largest in the country.

In January, the home building industry descended upon an Orlando market that had changed quite a bit since the last year's International Builders' Show. Some of those changes included:

Prices: Prices had accelerated 30 percent, from $179,000 in January 2005 to $232,500 in October 2005 (the most recent data as of this article).
Permits: Permit activity had increased as well with 34,907 total permits issued over the 12 months ending in October. The 26,416 single-family permits issued during that time were the 9th most of any market.
Jobs: More than 41,000 jobs had been added, and unemployment stood at a paltry 3.2 percent. The Employment Growth/Building Permit ratio was at a healthy 1.2.
Foreign Investment: Significant changes in the exchange rates and several non-stop flights per day from London contributed to a surge in investor activity in early 2005 that had subsided by the time of the conference. A July study by the Florida Association of Realtors and the National Association of Realtors showed that international buyers accounted for 15 percent of all home sales in Florida, and Orlando accounted for 23 percent of the state's sales to these buyers, second only to Miami. The substantial number of resale homes for sale in January were partially the result of investor selling
Domestic Investment: Meritage Homes purchased Orlando-based Greater Homes, which meant that 12 of the 16 largest home building Giants in the country have operations in Orlando (MDC, Shea, Weyerhaueser and NVR are the four who do not).

Up and Coming Market: Charlotte

Many builders and analysts tend to dismiss Charlotte as a small market, but they should think twice. Consider the following:

With almost 22,000 permits in the last 12 months, Charlotte is the 13th largest housing market in the country
The 6.9 million people within a 100-mile radius of the city compares quite favorably to the 7.5 million people within the same radius of Atlanta
After three tough years, including a drop in employment levels in 2002 and 2003, the Queen City has added 22,700 jobs in the last 12 months
According to the Charlotte Chamber of Commerce, during the last 10 years, nearly 8,500 new firms have invested $9.6 billion in Charlotte facilities
Fortune 500 companies like Bank of America, Lowe's and Wachovia count the Charlotte MSA as their corporate headquarters

If that is not enough to get your attention, consider that Charlotte ranked third among large cities in the rate of increase in the number of young people, according to the Census Bureau.

According to local market expert Chuck Graham of Newton-Graham, "Charlotte continues to grow nicely. Lot sales, permits, new and resale closings are all expanding at rates in excess of 15 percent year over year." The 2002 and 2003 recessionary years in Charlotte took their toll on home prices, resulting in modest and even negative periods of price appreciation. Today's median home price of $158,000 is at the same level as one year ago. Our Housing Cycle Barometer rates Charlotte at 1.5, making it highly affordable now in relation to its historical levels.

If you are searching for a market with a positive long-term outlook and some economic diversity from your current market, consider Charlotte. However, do your due diligence first. According to Graham, "The dark side of such growth is the ease of entry and production. There are just too many builder/neighborhood positions to produce many remarkable community successes."

Top 20 Metro Areas

			Employment			Affordability			Permits
		Short-Term Outlook/Grade	1-Year Payroll Employment Growth	1-Year Growth Rate	Unemployment Rate	Median Resale Home Price	Resale Housing Costs as % of Income	Housing Cycle Barometer	12-Month Single-Family Permits	1-Year Single-Family Growth	12-Month Total Permits	Total Permits as % of Peak Permits
1	Atlanta	B	30,500	1.34%	5.4%	$163,636	26.8%	5.3	59,826	2.6%	75,194	100%
2	Phoenix	B	75,700	4.45%	4.4%	$260,000	40.2%	6.3	54,551	-4.3%	63,743	97%
3	Houston	B+	40,800	1.78%	5.5%	$141,100	23.9%	2.1	50,039	6.8%	60,970	93%
4	Riverside-SB	C	20,900	1.80%	5.3%	$370,000	64.8%	7.3	45,918	8.8%	52,503	91%
5	Dallas	B+	21,300	1.11%	4.8%	$155,900	24.6%	1.1	30,408	1.5%	36,992	50%
6	Las Vegas	A+	61,700	7.39%	3.9%	$300,000	49.1%	5.4	29,847	-8.2%	36,242	88%
7	Chicago	B	41,900	1.11%	5.3%	$246,500	40.3%	6.7	28,207	1.9%	41,829	98%
8	Tampa	B+	31,000	2.41%	3.4%	$182,500	35.3%	6.0	27,098	20.7%	34,339	91%
9	Orlando	B+	41,200	4.18%	3.2%	$232,500	40.7%	6.4	26,416	-3.4%	34,907	98%
10	Fort Myers	C+	10,200	5.00%	2.7%	$206,823	36.5%	6.9	22,798	66.0%	29,366	100%
11	Washington D.C.	C+	67,700	2.92%	3.2%	$465,000	56.5%	9.0	22,634	-0.6%	29,548	78%
12	Jacksonville	B+	15,500	2.63%	3.4%	$172,000	29.0%	5.6	18,781	32.9%	25,481	100%
13	Charlotte	A	22,700	2.88%	5.0%	$158,000	25.6%	1.5	18,711	7.3%	21,955	96%
14	Minneapolis	C+	22,400	1.27%	3.1%	$243,000	31.5%	6.1	17,612	-13.3%	22,677	80%
15	Denver	B	15,500	1.31%	4.8%	$239,900	36.6%	5.9	17,313	5.2%	20,788	72%
16	Fort Worth	B+	11,300	1.42%	4.6%	$114,200	19.4%	2.8	16,993	13.6%	20,132	52%
17	Sacramento	C	12,600	1.46%	4.7%	$385,000	62.1%	7.1	16,407	-12.9%	20,117	84%
18	Austin	B	13,600	2.02%	4.0%	$158,600	27.1%	3.1	15,906	-10.4%	20,792	78%
19	San Antonio	B+	13,200	1.73%	4.5%	$130,700	25.4%	1.8	14,087	2.9%	21,860	99%
20	Nashville	B	11,400	1.58%	4.4%	$147,000	26.2%	5.0	13,892	8.5%	17,140	93%
Sources: Bureau of Labor Statistics; Census Bureau through the month ending October 2005; John Burns Real Estate Consulting

jburns@realestateconsulting.com [1]