By Peter Ricci
Houston is known as the “Bayou City,” but if housing construction data from the Census Bureau for 2011 is any indicator, it should also be called the “Construction City.”
Cheesy? Maybe. True? Well, according to the Census Bureau, more than 31,000 construction permits were issued in Houston in 2011, by far the most in the country (Dallas, which came in at number two, had 18,686). Also, in terms of construction activity, Houston had the fourth-busiest housing market in 2011, with its 13.55 construction permits per 1,000 housing units ranking only behind Raleigh, Austin and El Paso.
Houston Construction Activity Testament to Strong Local Economy
In a post for Atlantic Cities, Jed Kolko, Trulia’s chief economist, explained that two primary factors have contributed to the huge increases in construction activity in Houston and other areas:
- First, Kolko wrote that areas with high construction have long-term employment growth, which is, in his words, “the best guide to future housing demand.” And as any agent in Houston knows, Houston has one of the strongest job markets in the country, with an unemployment rate of just 5.8 percent.
- And second, metros like Houston were not as impacted by the housing boom; thus, overbuilding did not occur, prices did not suffer and the housing markets are ready to absorb new inventory; and anybody who has been following our coverage of the Houston housing market knows how strong sales have recently been.
Jeff Burke, the founder of real estate tech firm NuHabitat and a former homebuilder in Houston, said that the Bayou City’s strong economy, which has grown increasingly diverse since the late ’80s, has contributed enormously to its strong housing market.
“Houston’s economy at one time was dependent on the energy sector,” Burke said. “Now, we have a much broader spectrum of industry.”
New Home Construction a “Bet on Future Growth”
Perhaps the most promising aspect of all in Houston’s surging construction activity is what it signifies for the future of the housing market. As Kolko explained, builders are not going to build just anywhere.
“Construction activity is a bet on future growth, he said. “Developers will build only in areas where they expect housing demand in the future.”