Houston Economic Indicators – Dallasfed.org

Job growth in Houston continued to moderate in March. However, the layoff announcements did not signal an increase in job losses. Export volumes through the Port of Houston have continued to grow strongly while imports have increased moderately since November. Houston’s single-family real estate market indicators were healthy despite rising mortgage rates. There was strong activity in new single-family housing permits and existing home sales in March, and the inventory of homes on the market improved. However, permits to build new multifamily units were low.

Job

Strong employment growth except in trade and energy

Year-to-date, Houston employment increased 1.8% annualized (or 15,310 jobs) in March, matching the trend rate of employment growth (Chart 1). The strongest gains were in education and health services, which saw an increase of 5.0 percent (5,662). Educational services and hospitals led growth in this sector, each increasing about 7.0 percent annualized. Leisure, hospitality and manufacturing both saw increases, with annualized growth rates of 3.3 percent and 3.2 percent, respectively.

These year-to-date gains were offset by losses in trade, transport and utilities (-4,541) and the mining sector (-1,031). Commerce, transportation and utilities contracted 2.6% annualized in the first quarter of 2024. As this is Houston’s largest employment sector, this decline weighed heavily on overall growth in the sector. Metro. Losses were heaviest in retail trade, which declined 5.3 percent annualized (-4,410), and were led by clothing, building materials and motor vehicles.

However, job growth was stronger year-over-year in March, increasing 2.4 percent (79,340). Similar to the year-to-date data, education and health services led the growth with 4.9 percent year-on-year (21,690). Over the past year, Houston’s job market has been strong and no major sector has experienced a decline in employment.

Layoff announcements plateau

Large companies in the Houston Metropolitan Statistical Area (MSA) announced layoffs of 91 workers in March, but none in April. The actual date of termination of employment is two to three months later than the announcement. As a rolling three-month average, layoffs peaked at 332 in January 2024 and declined to 272 in March and then 30.3 in April (Chart 2). Despite a wave of departures in January, the low levels in the preceding and following months indicate that the job market remains strong.

International exchange

The Port of Houston is one of the largest ports in the world, and Houston has a high share of employment in commerce and transportation. Since the monetary value of total trade is highly correlated with the prices of oil, gas and petroleum products, actual ship tonnage provides a clearer measure of port activity.

As of February 2024, Houston-Galveston District exports increased to 30.7 million metric tons (MT) and imports reached 7.2 million tons. The three-month moving average of February exports was 29.9 million tonnes and imports were 6.8 million tonnes (Chart 3).

The port’s exports have seen strong growth since 2016. Oil and gas produced in the United States are transported to refineries and petrochemical plants in Houston and then exported around the world. Conversely, the tonnage of imports has been declining since the mid-2000s, although with a slight increase since November 2023.

Residential real estate

Single-family building permits remain high

The three-month rolling average of building permits for single-family homes in the Houston MSA decreased slightly from 4,392 in February to 4,379 in March (Chart 4). The number of permits has remained generally stable since May 2023; however, the level at which they have plateaued remains above pre-pandemic averages. From January 2013 to January 2020, single-family building permits averaged 3,154 per month. Since March 2023, they have averaged 4,316 per month.

Multifamily building permits in Houston fell from a high of 3,197 units in August 2022 to 1,124 in March 2024 over a three-month rolling average. However, March data shows a slight increase from February’s 941 units.

Houston multifamily rent growth slows

Houston’s new multifamily lease rent index increased 1.2% year over year in March (Chart 5). This is a dramatic slowdown from the 12.3% increase recorded in March 2022. Rental markets in other Texas metro areas saw rents decline in March due to an increase in housing supply and a slowdown in demand.

Houston has not seen rent increases comparable to other metros in Texas or the country after the pandemic. An increase in construction from 2016 to 2020 means Houston’s residential market was not as tight before the pandemic as other Texas metros.

Existing home inventory builds as sales decline from early 2022 highs

Mortgage rates rose to 7.6% in April from 6.9 in April 2023, but remained below 2023 highs. High rates have slowed the housing market since the post-pandemic boom period, in particularly the existing housing market.

Existing home sales in Houston fell from 7,352 in January to 7,616 in February, but remained well below their post-pandemic peak of 10,234 in January 2022. To put that in context, existing home sales in Houston averaged about 7,000 per month from 2014 to 2019.

Houston home inventory reached 3.7 months of supply in February, up from 3.5 months in January, due to a strong recovery in the number of homes listed for sale (Chart 6). It is generally estimated that a balanced real estate market has four to five months of inventory. Houston averaged 3.5 months of inventory between 2015 and 2019 during the relatively stable period of modest increases in nominal home prices between the Great Recession and the pandemic.