This article was in the August 2011 Issue of the Houston Builder Magazine. It gives some great information about the industry.
Dr. Ray Perryman, president of the economic and financial
analysis firm with Perryman Group, spoke to the approximately 560 guests at the
annual GHBA Mid Year Forecast Luncheon.
The following are key points made concerning the economy both nationally
and locally.
“In the third quarter of 2009, the Gross Domestic Product
(GDP) grew by approximately 1.6 percent.”
While that number represents a small jump, it was significant in terms
of the context of the downturn. Dr.
Perryman explained of that 1.6 percent, 1.5 percent was car sales.” This phenomenon was due to the government
rebate program ‘Cash for Clunkers.’
In the fourth quarter of 2009, the GDP grew by a high rate
of about 5 percent. In the first quarter
of 2010, it grew by about 3.7 percent.
“That’s when we said the GDP growth was slowing down a bit,” Perryman
reported. “And then the next quarter
(second quarter of 2010) was about 1.7 percent.”
Midway through 2010, Dr. Perryman explained that the media
was dramatizing the doom-and-gloom of the economy. There were many reports circulating noting it
was slowing dramatically and speculating a double-dip recession.
“It was only about 2 percent the next quarter (third quarter
of 2010),” said Dr. Perryman. “It rose
slightly the fourth quarter, just over 3 percent.” In the first quarter of 2011, it dropped to
1.8 percent.
“I think close to 3 percent is something that Houston can
probably sustain, “ said Dr. Perryman.
He concluded it wasn’t a trendsetter, “but demonstrated slow, healthy
growth.”
“If you give Houston 6 to 9 months, we are going to have a
very strong couple of quarters and that will help us get back on track.” The slow recovery can be attributed in part
to corporate America’s uncertainty, which has historically withheld about $600
to $700 billion in cash on any given day.
Dr. Perryman said today, corporate America is sitting on about $2.4
trillion in cash, which is about four times the normal amount.
Dr. Perryman concluded with the factors contributing to the
success of Texas. They include our
robust mineral sector and a strong conservative banking industry.
“Another factor was that our housing industry was not dramatically
overbuilt. We gained in round numbers
about 400,000 people a year. On average
there are approximately 1,200 people a day moving to Texas,” Dr. Perryman
noted.
“If you add 400,000 people a day to an economy, you’re going
to need 150,000 to 160,000 housing units,” he said. “At the peak of construction during this
mortgage crisis, Houston goes through approximately 215,000 houses.”
Comparatively, he explained that in 1983, when the state was
smaller and needed approximately 130,000 units, “We didn’t build 215,000, we
built 290,000. This resulted in a huge
inventory that could not be absorbed.”
Dr. Perryman commended in this last recession, the builders
stopped building very quickly once the downturn was imminent. The immediate response to the economy enabled
a much quicker absorption rate.
Perryman concluded by saying, “Nationally, the bottom line
is we are probably about 6 to 9 months waiting on any little spurt in
growth. But overall, here in Texas,
we’ve done a bit better.”
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