Houston Economic Indicators

November 04, 2024

Houston's economy continues to bounce back from a slow summer and damage from Hurricane Beryl. From June through September, payrolls in the metro expanded 2.5 percent. The unemployment rate has held steady since July. The housing market continues to come into better balance with rising inventories, stable price growth and home sales below 2020-21 levels. However, apartment rent growth has picked up in recent months. Permits for single-family homes ticked up slightly in September after a sharp summer decline, while multifamily permits rose.

Labor market

Local labor market grows robustly in third quarter

After a summer of job losses, strong gains in August and September have returned Houston's labor market closer to trend growth. For the three months ending in September, employment in Houston grew an annualized 2.5 percent, with 21,128 jobs added (Chart 1).

Construction payrolls expanded the fastest with 10.0 percent annualized growth over that period. Growth in construction employment was strong across subsectors, but heavy and civil engineering construction-the smallest of the three major construction subsectors-added the most jobs. Trade, transportation and utilities and leisure and hospitality both grew strongly from June to September. After lethargic job growth in trade, transportation and utilities the first half of the year, Houston's largest employment sector saw growth pick up, adding more jobs than any other sector.

However, over that period, employment in oil and gas, government and information declined. Financial activities remained flat.

Year over year in September, Houston's labor market grew slightly below trend, with employment expanding 1.6 percent. Oil and gas grew the most, with year-over-year gains of 8.9 percent. Despite the strong growth, oil and gas comprises a small share of the metro's labor market, just 2.2 percent. Larger sectors like trade, transportation and utilities and professional and business services grew modestly, 1.6 and 1.0 percent, respectively.

Unemployment rate remains steady

The unemployment rate in Houston remained unchanged in September at 4.4 percent, where it's remained since July (Chart 2). The metro's stable unemployment comes as the local labor force has grown at a faster pace. In 2024, Houston's labor force grew an annualized 2.9 percent. From 2010 to 2019, the labor force grew a comparatively slower 1.9 percent annualized.

The state's unemployment rate has also been holding fairly steady the last few months. U.S. unemployment slid to 4.1 percent in September after peaking at 4.3 percent in July and remaining steady since.

Residential housing market

Nominal house-price growth stabilizes

Second-quarter growth in the Houston Federal Housing Finance Administration (FHFA) home-price index was 2.4 percent year over year following a slight decline over the previous two quarters. This is just below Texas' 2.6 percent growth (Chart 3).

The median price of a home sold in Houston in August was $332,000 in current dollars-a decline of 0.7 percent year over year. Adjusting for inflation, home prices peaked in early 2022 at $360,000.

Even after adjusting for inflation, housing in Houston has become more expensive compared with before the pandemic. In 2018, home prices averaged around $285,000 in today's dollars.

The FHFA price index is a repeat sales index that tracks the purchase prices of the same homes over time and gives a more accurate but less timely view of how much the average price of a home is changing. In contrast, the median home selling price tracks whichever homes happen to have sold in a given month. It is more timely but can be skewed based on the changing composition of the homes selling at that time.

Houston inventory of homes steady

Houston's inventory of homes ticked back up to 4.0 months of supply in August from 3.9 in July as listings rose (Chart 4). The level of inventory has remained stable at around four months of supply since April. The number of home sales in August declined to 6,600. This is slightly below the 2023 average of 7,200 monthly sales.

Rent growth increases

Nominal apartment rents for new leases measured by the Zillow Observed Rent Index grew 1.3 percent year over year in September (Chart 5). This is an increase from the average monthly rent growth of 0.6 percent in the first half of the year.

Rent growth in Houston has been outpacing other Texas metros since mid-2023. Markets like Dallas and Austin entered the pandemic era with relatively tight apartment supplies and saw sharp acceleration in rents as a result. Thanks to new construction and slowing demand, rents in most major Texas metros have since declined. Higher residential building activity in Texas puts downward pressure on rent increases compared with the nation.

Permits for new housing units recover slightly

The three-month moving average of building permits for single-family homes in the Houston metropolitan statistical area ticked up to 4,282 in September (Chart 6). Permits fell sharply this summer to 3,958 in July. In first quarter 2024, single-family permits averaged 4,339.

In contrast, the three-month moving average of multifamily permits grew from 588 in June to 1,007 in September. However, over a longer time frame, multifamily permits have declined. Year over year in September, permits fell 35 percent. High interest rates, rising costs, weakening occupancy and falling lease rates have made new investments less attractive.

The spike in multifamily permits in 2022 translated into record supply growth in 2023 when 19,529 new apartments were completed in Houston, according to CBRE. Year to date in September,16,238 have been completed.

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