Austin is the only major housing market where single-family permit activity has returned to normal.
The number of housing units permitted in Austin in 2015 is 8.0% above the number permitted in the first six months of last year.
Single-family permits are up 1.5% year-to-date, while multifamily units permitted are up 18.9%.
Austin has the most robust level of economic and housing activity among U.S. major metros in the second quarter of 2015 according to Thursday’s release of the Leading Markets Index (LMI) by the National Association of Homebuilders (NAHB).
The NAHB’s index shows that 66% of markets have shown year-over-year improvement but only 75 of 364 metro areas have returned to or exceeded their last normal levels of economic and housing activity. That represents a net gain of 13 markets over the same quarter last year. The LMI summarizes economic and housing activity (average single-family permit, price, and employment levels for the last 12 months). Nationally, the LMI score indicates that the U.S. is running at 92% of normal economic and housing activity. That is up from 91% last quarter and 88% a year ago.
Among the 50 largest metros, Austin has the highest LMI, 1.26—meaning Austin is running at 126% of normal economic and housing activity). With an LMI of 1.47, Baton Rouge tops the ranking of 106 metros with at least 500,000 population. Austin’s LMI is up from 1.24 last quarter and 1.15 a year ago.
Austin’s score for single-family permit activity is ahead of normal, at 1.06, while the nation is at 0.46. Only 26 of 364 metros have permit activity at or above normal. Of the three elements in the LMI (house prices, permits and employment), the housing permit level has made the least progress toward normality across U.S. metropolitan housing markets. Among the top 50 metros, Austin is the only market with a permit activity score above 1.00. House prices have had the broadest recovery, with 345 markets returning to or exceeding their last normal level. Normal employment levels have been met or exceeded in 64 markets.
In the NAHB’s index, 2000-2003 represents normal for permits and home prices, and for employment, 2007 is the base comparison. In computing index values, permits and employment are divided by population in the current and normal period to account for growth that did take place.
According to data from the Real Estate Center at Texas A&M, Austin’s residential permit activity in the first 6 months of 2015 totals 10,706 units, which is 8.0% above the same period last year. The value of permits is up by 11.4%. What accounts for much of this difference is a substantial increase in the average value of multifamily units permitted.
The number of single-family permits, which increased 32.3% in 2014 over 2013, is holding close to 2014 in the first half of 2015. At 6,311 units permitted in 2015, single-family is 1.5% ahead of 2014. The average value of a single-family unit, $226,713, is up only 0.7% over the first half of 2014.
Multi-family units are 4,395 of the year-to-date total and are up 18.9% over 2014. The average value of a multifamily unit has increased from $82,882 in the first half of 2014 to $106,833 in 2015, a 28.9% increase. Thus, with robust gains in both units permitted and average value per unit, the total value of multifamily permits is up 53.2%, while the total value of single-family permits is up 2.3% year-to-date due to moderate gains in units and average value per unit.
After two years of Austin’s permit activity being dominated by multifamily (57.5%), more single-family units (11,842 or 58.4%) than multifamily units (8,434 or 41.6%) were permitted in 2014. In 2015, 58.9% of units permitted thus far are single-family. Before 2012, the last time multi-family permits exceeded single-family permits was 1986.
Nationally, 2015 permit activity is up 14.6% year-to-date, following annual growth of 6.2% in 2014. Single-family units are up 7.5% while multifamily is up 26.0% over the first half of 2014. The total value of permits in 2015 is up 16.1% over 2014 year-to-date. The average value of multifamily units is up 7.7% compared to 2.7% for single-family. Multifamily accounts for 41.8% of total permits in the first half of 2015, up from 38.0% in 2014. The last time multifamily permits accounted for more than 40% of all permits nationally was 1985.
Texas, with 8.5% of the U.S. population, accounts for 14.5% of housing units permitted in 2015. Austin, which currently represents 0.6% of the U.S. population, accounts for 1.8% of U.S. permits in 2015. Austin is also taking an outsize share of Texas permits as well. While Austin is presently 7.2% of the state population, it issued 12.5% of units permitted thus far in 2015.
While Austin ranks as the 35th largest metro based on population size, it issued more housing permits in 2014 than all but 8 metros (Houston, New York, Dallas-Fort Worth, Los Angeles, Atlanta, Washington, Seattle, and Phoenix—each among the top 15 largest U.S. metros). In 2015-to-date, Austin ranks 10th for total permits issued, surpassed by the same 8 metros, plus Miami.
The table above and the graph below look at permit activity in major U.S. metros on a per capita basis. Austin’s 19,949 total permits in 2014 translate to 1,027 per 100,000 population, which was the highest rate of per capita activity among the 50 largest U.S. metros. Austin’s 10,706 permits issued in the first 6 months of this year amounts to 551 permits per 100,000 population and that is also the highest rate among large metros.
Single-family activity was also higher in Austin than almost anywhere else in both 2014 and in the first six months of 2015. Austin issued the 7th largest number of single-family housing permits among all metros in 2014 (behind only the much larger Houston, Dallas-Fort Worth, Atlanta, Washington, New York, and Phoenix markets). Austin ranks 6th for total single-family permits issued in 2015 (behind the same markets, except New York which fell to No. 10).
Note: Data on residential permit activity for the Austin metro from both the U.S. Census Bureau and the Real Estate Center at Texas A&M is included in the Chamber’s monthly Economic Indicators files. Data since 1980 is in this Excel file, which is updated monthly.
Related Categories: Central Texas Economy in Perspective