Houston continues to expand at a strong rate. For the year ending in June, payroll employment was up by 3.2 percent, or slightly more than 90,000 jobs. Still, it is fair to say that the Houston-The Woodlands-Sugar Land metropolitan area is not growing as consistently fast in 2014 as it did at the end of 2012 and into early 2013. Strong job growth has brought Houston’s unemployment rate down to 5.0 percent as of June, and we expect it to continue to trend lower, dipping below 3.5 percent by the end of 2015. A key challenge in forecasting Houston’s unemployment rate (and other fast-growing Texas regions) is the balance between job growth and in-migration. We assume that job growth moderates in 2015, consistent with a stable oil price forecast. We also assume that in-migration remains strong, near recent highs, in the neighborhood of 80,000 people per year. Even with moderating job gains and still-strong in-migration, The Houston labor market will tighten up significantly over the next year and could ultimately be a constraint to future growth. Stronger-than-expected in-migration would relieve some of the scarcity of available workers and growing wage pressures.
Strong population growth is contributing to a residential building boom in the Houston area. The Woodlands, the huge 28,000 acre master-planned community is almost sold out of its 33,210 lots. A smaller, 2,000 acre community is in the works 13 miles north of the Woodlands, expecting to add more than 4,600 lots. Tight residential housing markets are leading to strong house price gains in the Houston area. According to Trulia, the national average asking price for houses was up 7.8 percent in July over the previous 12 months, while Houston was up 10.4 percent. Trulia said that Houston house price growth ranked 24th out of the top 100 metro area nationally. Despite the rapid pace of building, housing inventory in Houston is very tight. ZipRealty says that Houston is the fourth fastest-moving housing market in the U.S. Office space is tight, too.
Click here for the complete Houston MSA Regional Economic Update: Houston 2014Q2.