Houston continues to add jobs and new enterprises at a robust clip, fueled by very active global energy markets. Recently higher oil prices have added to the push for petroleum. Very low natural gas prices are the flip side of the energy coin. With nominal natural gas prices below $2/mmBTU and inflation-adjusted natural gas prices near historic lows, natural gas drilling programs are being scaled back across the country. At present, roughly one-third of U.S. natural gas is used to generate electricity, roughly a third goes to industrial applications and a third goes to everything else, including a very small slice for transportation. Given ample supply and low costs, greater demand for natural gas for all applications is a given. However, in the short run, supply gains are far out-stripping demand growth. Storage capacity for natural gas is filling up and that could lead to even weaker prices later this year.
Payroll employment in Houston is at an all time high of 2,651,000 as of February, up 3.6 percent from a year ago. Houston’s unemployment rate of 7.1 percent in February matched the Texas average and was well below the U.S average of 8.3 percent for the month. Rapid job growth is not unusual for Houston. The current yearly growth rate remains below the recent historical high of 5.5 percent from July 1998. Not only is Houston adding jobs, but it is also adding companies, and existing companies are adding facilities. Direct Energy is relocating its corporate headquarters from Toronto to Houston. Exxon Mobil is building a new 385-acre campus north of Houston.
House prices in Houston did not experience the destabilizing price appreciation of other areas in the mid-2000s, and have been firmer on the downside. Strong job growth and in-migration is keeping housing inventory lean and prices supported. According to FHFA data, Houston house prices are leveling out earlier than most other housing markets. As of 2001Q4 house prices in Houston were down just 0.7 percent from a year earlier. Housing starts in Houston in February were up 51 percent from a year earlier, versus 35 percent for the U.S. as a whole.
Click here for the complete Houston MSA Regional Economic Update for 2012Q2: Houston2012Q2.