GIANTS Steer Clear Of Two Large Markets
Land of large land parcels is one factor that has contributed to Seattle's stagnant growth.
With all of the geographic expansion taking place, would it surprise you to know that only three GIANTS build in the 23rd largest housing market in the country? Would you be even more surprised to learn that only one of the three has more than four active communities in that market?
This month we'll explore why GIANTS have steered clear of two of the largest single-family housing markets in the country (Seattle, ranked 23rd with 12,643 single-family permits in 12 months ending October, 2004; and Boise, ranked 46th and rising quickly with 7,434 single-family permits over the same time period). We think they'll change course for Boise soon.
Featured Major Market: Seattle
Seattle's economy is rebounding from the double-whammy of the technolog2
y downturn in 2000 and the departure of Boeing's corporate headquarters to Chicago in 2001. In the last 12 months, more than 22,000 jobs have been added to the payroll, and more than 50,000 people (including the self-employed) are working in Seattle than were working one year ago. Clearly, Seattle's economy is rebounding.
Seattle is not a medium-sized market. If one were to count adjacent Tacoma and Bremerton, Seattle would be the 13th largest market in the country, right behind Charlotte. This is a major opportunity and one that has been largely ignored by the major builders.
There are a number of reasons that the GIANTS have avoided Seattle. While no one would open their books to us, the primary reason we heard for the lack of large builders is the lack of profit. Builders reportedly have difficulty making the 10 percent pretax profit margins they usually require for a variety of reasons.
One reason cited for the lack of profit is that large parcels of land are hard to come by. Land ownership is extremely fractured, so large assemblies are rare. Shea Homes was able to acquire a large parcel in Redmond and is building an active adult Trilogy community. They have no other operations in Seattle.
The other two national GIANTS in Seattle are Centex and D.R. Horton. The two local GIANTS are Quadrant Homes (a Weyerhaeuser subsidiary) and Polygon Northwest. I expect Centex and D.R. Horton to grow their operations, and a few additional GIANTS to join them in Seattle.
Featured Up-and-Coming Market: Boise
Boise does not currently have any GIANTS, at least none that could be found. GIANTS should take a serious look at Boise for the reasons that follow.
Boise is one of the fastest growing markets in the country. During the 1990s, Boise had the 7th fastest rate of population growth among all 280 metropolitan areas, growing 46 percent from 296,000 people in 1990 to 432,000 in 2000.
Local builders have benefited, as shown by the surge in construction activity in Figure 1.
I don't believe that Boise is a fluke. It reminds me of what Denver must have been like 30 years ago, or Jacksonville 10 years ago. For the past several years, Boise has ranked in the top 10 of Forbes magazine's survey on the Best Places For Business And Careers.
Boise has an excellent year-round climate and plenty of recreational opportunities. The Boise Metro Economic Development Council is active — recently landing a major college football bowl game — and continues to attract tourists and businesses. The recently completed $108 million airport renovation is probably the jumpstart Boise needs to propel its economy forward. Boise is also a popular retirement area.
Land is plentiful in Boise, as evidenced by the "for sale" signs all over town, and high-quality move-up housing in Meridian and Eagle are as popular as entry-level homes priced below $130,000 in Nampa and Caldwell. My apologies to the local builders for letting the secret out.
Metro Areas Ranked by Percent Population Change
| Census Population | |||
| April 1, 2000 | April 1, 1990 | ||
| 1 | Las Vegas, NV | 1,563,282 | 852,737 |
| 2 | Naples, FL | 251,377 | 152,099 |
| 3 | Yuma, AZ | 160,026 | 106,895 |
| 4 | McAllen, TX | 569,463 | 383,545 |
| 5 | Austin, TX | 1,249,763 | 846,227 |
| 6 | Fayetteville, AR | 311,121 | 210,908 |
| 7 | Boise, ID | 432,345 | 295,851 |
| 8 | Phoenix, AZ | 3,271,876 | 2,238,480 |
| 9 | Laredo, TX | 193,117 | 133,239 |
| 10 | Provo, UT | 368,536 | 263,590 |
| 11 | Atlanta, GA | 4,112,198 | 2,959,950 |
| 12 | Raleigh, NC | 1,187,941 | 855,545 |
| 13 | Myrtle Beach, SC | 196,629 | 144,053 |
| 14 | Wilmington, NC | 233,450 | 171,269 |
| 15 | Fort Collins, CO | 251,494 | 186,136 |
| 16 | Orlando, FL | 1,644,561 | 1,224,852 |
| 17 | Reno, NV | 339,486 | 254,667 |
| 18 | Oscala, FL | 258,916 | 194,833 |
| 19 | Auburn, AL | 115,092 | 87,146 |
| 20 | Fort Myers, FL | 440,888 | 335,113 |
| 21 | West Palm Beach, FL | 1,131,184 | 863,518 |
| 22 | Bellingham, WA | 166,814 | 127,780 |
| 23 | Denver, CO | 2,581,506 | 1,980,140 |
| 24 | Colorado Springs, CO | 516,929 | 397,014 |
| 25 | Dallas, TX | 5,221,801 | 4,037,282 |
| 26 | Charlotte, NC | 1,499,293 | 1,162,093 |
| 27 | Las Cruces, NM | 174,682 | 135,510 |
| 28 | Brownsville, TX | 335,227 | 260,120 |
| 29 | Richland, WA | 191,822 | 150,033 |
| 30 | Punta Gorda, FL | 141,627 | 110,975 |
| 31 | Fort Pierce, FL | 319,426 | 251,071 |
| 32 | Tucson, AZ | 843,746 | 666,880 |
| 33 | Portland, OR | 2,265,223 | 1,793,476 |
| 34 | Santa Fe, NM | 147,635 | 117,043 |
| 35 | Houston, TX | 4,669,571 | 3,731,131 |
| 36 | Bryan, TX | 152,415 | 121,862 |
| 37 | Nashville, TN | 1,231,311 | 985,026 |
| 38 | Grand Junction, CO | 116,255 | 93,145 |
| 39 | Salt Lake City, UT | 1,333,914 | 1,072,227 |
| 40 | Greenville, NC | 133,798 | 107,924 |
| Source: U.S. Census Bureau | |||
Top 25 Metro Areas
| Employment | Affordability | Permits | ||||||||||
| Short-Term Outlook/Grade | 1-Year Payroll Employment Growth | 1-Year Growth Rate | Unemployment Rate | Median Resale Home Price | Resale Housing Costs as % of Income | Housing Cycle Barometer | 12-Month Single-Family Permits | 1-Year Single-Family Growth | 12-Month Total Permits | Total Permits as % of Peak Permits | ||
| 1 | Atlanta | B | 11,200 | 0.5% | 4.4% | $160,110 | 23% | 4.1 | 56,848 | 13% | 69,968 | 100% |
| 2 | Phoenix | B+ | 40,200 | 2.5% | 3.9% | $179,000 | 30% | 5.0 | 55,253 | 25% | 63,861 | 100% |
| 3 | Riverside | B | 23,500 | 2.2% | 5.8% | $293,000 | 48% | 5.6 | 41,350 | 18% | 48,491 | 84% |
| 4 | Houston | B | 23,100 | 1.1% | 6.2% | $132,600 | 22% | 1.0 | 39,784 | 19% | 51,836 | 99% |
| 5 | Las Vegas | B | 38,900 | 4.7% | 4.0% | $270,000 | 45% | 5.0 | 36,676 | 25% | 43,438 | 100% |
| 6 | Chicago | D | 10,100 | 0.2% | 6.2% | $232,000 | 39% | 6.6 | 32,978 | 7% | 43,550 | 98% |
| 7 | Dallas | B | 10,000 | 0.5% | 6.0% | $147,800 | 24% | 0.3 | 30,428 | 18% | 37,705 | 95% |
| 8 | Washington D.C. | A+ | 70,400 | 2.5% | 3.2% | $410,500 | 46% | 5.8 | 29,055 | (7%) | 38,160 | 80% |
| 9 | Orlando | B | 22,400 | 2.4% | 4.3% | $170,000 | 30% | 5.0 | 27,353 | 32% | 34,321 | 100% |
| 10 | Tampa | B+ | 15,600 | 1.3% | 3.9% | $149,000 | 30% | 5.2 | 22,516 | 20% | 28,247 | 87% |
| 11 | Minneapolis | B | 12,300 | 0.7% | 4.3% | $216,000 | 27% | 5.3 | 20,97 | 11% | 28,042 | 100% |
| 12 | Charlotte | B+ | 16,200 | 2.0% | 5.4% | $155,500 | 27% | 0.0 | 18,762 | 7% | 22,339 | 91% |
| 13 | Sacramento | D | (,300) | (0.0%) | 5.0% | $334,000 | 50% | 5.9 | 17,463 | 3% | 19,836 | 94% |
| 14 | Austin | B+ | 4,500 | 0.7% | 4.4% | $150,500 | 24% | 1.8 | 16,814 | 48% | 21,024 | 96% |
| 15 | Detroit | F | (30,200) | (1.5%) | 6.6% | $204,950 | 36% | 6.6 | 16,396 | 11% | 20,800 | 91% |
| 16 | Raleigh | B+ | 12,000 | 1.8% | 3.4% | $179,000 | 29% | 2.4 | 15,556 | 13% | 18,787 | 87% |
| 17 | Denver | B | 5,000 | 0.4% | 5.0% | $235,563 | 38% | 5.7 | 14,980 | 18% | 18,838 | 70% |
| 18 | Fort Worth | B+ | 3,400 | 0.4% | 5.5% | $99,500 | 17% | 0.0 | 14,898 | 11% | 18,126 | 100% |
| 19 | Jacksonville | B | 14,700 | 2.6% | 5.0% | $150,000 | 26% | 5.1 | 13,831 | 13% | 17,963 | 100% |
| 20 | St. Louis | B | 33,800 | 2.6% | 6.2% | $143,250 | 26% | 4.7 | 13,495 | 17% | 15,938 | 87% |
| 21 | Philadelphia | B | 5,400 | 0.2% | 5.3% | $189,054 | 28% | 4.5 | 13,105 | 7% | 18,921 | 73% |
| 22 | Fort Myers | C+ | 7,900 | 4.2% | 3.6% | $283,145 | 49% | 6.8 | 12,978 | 55% | 19,407 | 100% |
| 23 | Seattle | B | 22,600 | 1.7% | 5.6% | $315,000 | 50% | 6.5 | 12,643 | 18% | 17,228 | 61% |
| 24 | Nashville | B+ | 8,100 | 1.2% | 3.8% | $125,000 | 21% | 0.3 | 12,601 | 14% | 15,736 | 100% |
| 25 | Indianapolis | C | (7,000) | (0.8%) | 4.7% | $129,232 | 22% | 2.4 | 12,552 | (6%) | 15,137 | 88% |
| Sources: job data, Bureau of Labor Statistic; one-year calculations, John Burns Real Estate Consulting Sources: permit data, Census Bureau; one-year calculations, John Burns Real Estate Consulting |
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