Q2 2012 Dallas, Texas Commercial Real Estate Economy

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Q2 2012 Dallas, Texas Commercial Real Estate Economy

Dallas is among those metro areas leading the national economic recovery. Its recession, while substantial, was not as deep as that which the nation as a whole endured. To that end it can thank its well-diversified economic base, including the resiliency of its large energy sector, a relatively moderate housing downturn (there was little pre-recession price escalation here) and ongoing strong population growth. With these factors in place and annual losses in average non-farm employment confined solely to 2009’s 3.9% (82,200-job) decline, the local economy was well-positioned to stage a robust rebound.

According to data provided by the U.S. Bureau of Labor Statistics (BLS), the Dallas-Irving-Plano Metropolitan Division, the Dallas side of the huge Dallas-Fort Worth MSA (the “Metroplex”), has nearly returned to pre-recession employment levels. Data for June 2012 show non-farm employment down only 0.3% (6,700 jobs) from June 2008. Recent job creation, accordingly, has been strong. Employment per the latest June was up 1.6% (33,600 jobs) from 12 months prior and was up fully 3.8% (76,900 jobs) since June 2010. (As the data indicate, here, as in many other areas, the pace of job creation slowed overall in the recent period.) Key to the rebound has been growth in the centrally important Professional and Business services sector. Employment therein as of June was up 1.7% (6,000 jobs) over 12 months and grew by fully 7.3% (24,500 jobs) over 24. Along these lines, gains in the smaller, related Financial Activities sector, amounting to a 5.9% (10,400-job) increase over 24 months, have been no less impressive. Reflecting Dallas’ large role as an inland port and its large Distribution sector, meanwhile, large job gains are reported as well for Trade, Transportation and Utilities. Even the construction of buildings sub-sector, mauled by the recession, has stabilized.

The latest murmurings at the national level suggests that the country’s housing market as a whole is at last bottoming-out; early signs of a turnaround have been indicated. Dallas, in any case, gives strong evidence of the trend. As reported by The Dallas Morning News at the end of July citing Standard & Poor’s/Case-Shiller index, home resale prices in May were up 3.8% year-over-year, “the greatest local rise in more than two years.” “Necessary conditions in the North Texas housing market are in place for increases in home prices,” an economist with the Federal Reserve Bank of Dallas informed this source. “With new and existing home inventories tight and construction activity still relatively low, we would expect prices to improve given the current amount of housing demand.” Indeed, Dallas evaded the rampant price appreciation trend seen across the nation in the pre-recession period. This, along with the relatively strong economy, helped mitigate the foreclosure crisis. According to CoreLogic, metro Dallas had the nation’s second-lowest May foreclosure rate (after Denver)—”about 1.6%.” Indeed, prices are quite low among major national metro areas. The National Association of Realtors put the Dallas-Fort Worth second quarter median home resale price at $163,000, up 7.6% year-over-year, up fully 10.0% for the quarter alone.

No less telling with respect to the emerging recovery in the local housing market are the recent increases in residential construction permitting. According to the U.S. Bureau of the Census, the 16,645 residential units authorized for construction during the first half of the year in the Dallas-Fort Worth MSA were up fully 42.6% from the comparable period of 2011. While the larger share of the recent gains has occurred in the multifamily sector, the 8,674 detached single-family units permitted during the period were up 19.0% year-over-year.