15. El Paso, TX
Market Health Indicator: 65.8
2011 Building Permit Forecast: 4,685
Percent Change in Building Permits: 1%
The secret is out. El Paso has been a big beneficiary of the 2005 Base Realignment and Closure Act (BRAC). Thanks to base closings elsewhere, more than 30,000 military personnel and their families have been relocated to Fort Bliss. The MSA's robust population growth has fueled demand for housing, new roads, and schools that has attracted national attention. The Brookings Institution ranks El Paso as the 20th "strongest" metro area in the country.
The influx of soldiers will continue this year and next, creating demand for more business services. Hanley Wood Market Intelligence forecasts the addition of 4,600 new jobs this year, followed by even bigger growth in 2012. El Paso, located near the border with Mexico, is quickly becoming a big city. The Census Department expects its population to top 1 million by the end of 2015.
The housing market is expected to rebound this year. Existing home prices rose slightly last year, reaching $132,000 in the fourth quarter. Builders sense that big growth may be afoot; they took out 34% more building permits n the fourth quarter than they did a year earlier. The biggest gains were in multifamily. Apartment Realty Advisors estimates that 8,000 new units will be needed to meet rising demand in 2012 created by the influx of military families.
Visit our Local Markets page for El Paso to see more data and analysis.
14. Nashville-Davidson-Murfreesboro-Franklin, TN
Market Health Indicator: 67.2
2011 Building Permit Forecast: 8,326
Percent Change in Building Permits: 53%
Nashville has enjoyed a dramatic improvement in hiring since unemployment peaked there in June 2009. The service sector has led the way, and now conditions in manufacturing and construction are improving. Several big local employers recently announced expansion plans. Austin Powder will spend more than $110 million for a new plant that will create 80 jobs, and Virginia-based Faneuil Inc. will open a new office and hire 200 people.
After three straight years of decline, incomes in Nashville finally turned positive last year, though they increased by only 1%. Moody's Economy.com expects income levels to rise at twice that rate this year.
After a very strong start, existing home sales stumbled down the home stretch and finished the year 4% behind the previous year. Flagging demand led to the fourth straight year of declining home prices, but median home prices ($164,000 last year) are still within $20,000 of their peak.
Improving economic metrics buoyed the spirits of builders, who increased the pace of building permit activity last year, after four years of declines. Total building permits in December were 35% above year-ago levels, with gains coming from both single-family and multifamily segments.
Visit our Local Markets page for Nashville to see more data and analysis.
13. Birmingham-Hoover, Ala.
Market Health Indicator: 70.1
2011 Building Permit Forecast: 1,657
Percent Change in Building Permits: 4%
Birmingham, the largest city in Alabama, seems to be ahead of the economic curve, with positive income, population, and job growth in 2010, all of which are expected to continue in 2011. Unfortunately, the payoff in renewed home building activity isn't expected until 2012, when Moody's Economy.com thinks permit activity will more than double.
Housing sales slowed 28% in the fourth quarter of last year, according to data from the Alabama Center for Real Estate. This led to a decline in median home prices for the fourth consecutive year. Even so, median home prices, which finished at $140,000 last year, are off only 15% from their peak of $165,000 in 2006. They are expected to remain stable this year.
Builders turned bearish last year, pulling 8% fewer building permits, a trend that's expected to reverse this year. Birmingham is a largely single-family market, with detached homes accounting for more than 85% of permit activity.
Visit our Local Markets page for Birmingham to see more data and analysis.
12. Dallas-Ft. Worth-Arlington, TX
Market Health Indicator: 70.7
2011 Building Permit Forecast: 30,630
Percent Change in Building Permits: 52%
Dallas may have dropped out of the list of the top 10 healthiest markets, but the Metroplex still managed to add 50,800 jobs outside of farming last year, a 1.8% increase in employment. That was enough for the U.S. Bureau of Labor Statistics to dub Dallas a "rebounding economy."
People and businesses continue to flock to this business center because of strong employment prospects and affordable housing. The median price of a home stood at $149,000 at year-end, just about where it was at the peak of the market. The Dallas Economic Development Council recently announced plans to revitalize the city's downtown to cater to young professionals. A similar effort by the city of Fort Worth appears to have worked.
Builders remain bullish on the area's prospects--they pulled 19,500 single-family permits last year, a 33% increase. In an indication that construction is about to accelerate, several developers last year picked up large tracts of land, especially in high-growth areas of Ft. Worth. The Pulte Group, for instance, recently bought 1,300 home sites at West Fork Ranch.
Visit our Local Markets page for Dallas to see more data and analysis.
11. Washington-Arlington-Alexandria, DC-VA-MD-WV
Market Health Indicator: 74.8
2011 Building Permit Forecast: 20,397
Percent Change in Building Permits: 32%
Strong job growth is the big story in the nation's capital. Non-farm employment rose 1.4% last year, with most jobs in the service sector. The unemployment rate (5.7% in December) is the lowest of any major metro area in the country. The prospect of finding employment drew more people last year to the Washington, D.C. region, and household formations are expected to grow another 1.2% this year.
Washington, D.C. is one of the healthiest residential real estate markets in the country. Existing home sales picked up throughout the metro area last year, with the exception of the District of Columbia. Northern Virginia and Prince George's County led the way, according to Fulton Research.
Sales were aided by a decline in median home prices, which used to soar above the national average. They fell to a more earthly $304,900 level last year, and they may have some way to go before they hit bottom. Moody's Economy.com projects a 7% decline in existing home prices this year, as banks work through foreclosures and sellers cut prices in response.
Builders are betting on continued prosperity. They drew 26% more building permits last year than the year before. Though both single-family and multifamily permits rose last year, and single-family permits account for two-thirds of the activity, multifamily construction is poised for some big increases, particularly in low-rise apartments close to light-rail stops. Greystar, for instance, recently announced plans to build five separate multifamily projects over the next two years that will add 1,500 homes.
Visit our Local Markets page for Washington DC to see more data and analysis.