Houston's economy in the coming year may begin showing the strains of the national real estate slowdown, according to Dr. Barton Smith with the University of Houston Institute for Regional Forecasting. Dr. Smith says he told apartment developers last year that the influx of new Houstonians from the hurricanes would not be a permanent windfall.
"The apartment market was way overbuilt in the summer of 2005. We had vacancy rates that were a 15-year high, and R ita and Katrina solved that problem almost instantaneously. But at our symposium last year we warned the developers of apartment complexes that that was going to start to trickle away and not just to build, keep building as though that was a permanent fixture on the Houston scene. They didn't listen."
Houston's real estate economy is faring better, largely due to job growth. That growth is fueled by higher energy costs, which he says will continue to remain high.
"If you look at the raw material—oil and gas—there's, we've actually got an excess inventory of both natural gas and oil in the United States. That's not our immediate problem. Our immediate problem is that this country has been going without adding refining capacity for years. And we are significantly short on refining capacity. We're not only importing oil today, we're importing gasoline—refined products. So what we've got is a situation where we've got gasoline prices today that are at or near an all-time high, but we have oil prices that are not even close to an all-time high."
At the annual spring symposium on real estate at the Hyatt Regency Hotel downtown, Dr. Smith said we can expect a continued general national slowdown, generated by the housing market correction. The job growth rate in Houston could start to decline, but Houston should see double the national growth rate.
A real estate trade group has lowered its expectations for the housing market this year. The National Association of Realtors says it expects existing home sales of 6.29 million in 2007, lower than the sales of 6.48 million in 2006. It cites stricter lending standards and fewer mortgages for borrowers with poor credit. The group anticipates new home sales will also drop, to 864,000 in 2007, down from the more than one million last year. And it predicts a decline in housing starts as well. National Association of Realtors senior economist Lawrence Yun says speculative buyers, who pushed home prices up to record highs in the past five years, have disappeared from the market. On the plus side, that's a boon to traditional home buyers looking for lower prices.
The Houston Association of Realtors Web site has been restored after being shut down since last Wednesday following being hacked, according to the Houston Chronicle. House hunters lost the ability to search the more than 50,000 properties when the site was taken down after hackers began loading a virus onto HAR servers. Association members were still able to access listings through the Multiple Listing Service portion of the system that only they can access. The system does not store credit card numbers or other personal data.
General Motors is the first automaker to join a business coalition dedicated to reducing greenhouse gas emissions. The nation's biggest automaker joined the U.S. Climate Action Partnership along with 13 other newcomers including Dow Chemical and Pepsico. It's an alliance of business and environmental groups. In January it told President Bush that mandatory emissions caps are needed to reduce the flow of carbon dioxide and other heat-trapping gases into the atmosphere. With the new additions, there now are 27 members of the group, which includes Houston-based ConocoPhillips, London-based BP, General Electric, Alcoa and Dupont. The CEOs have said mandatory reductions of heat-trapping emissions can be imposed without economic harm and would lead to economic opportunities if done across the economy and with provisions to mitigate costs.
A Senate committee has approved a plan to increase fuel efficiency standards to an average of 35 miles per gallon by 2020. The measure, passed on a voice vote, would raise the nationwide fleet fuel economy average by about 40 percent compared with the current levels of 25 miles per gallon. It would also increase standards by four percent a year from 2020 through 2030. Hawaii Senator Daniel Inouye says the bill isn't perfect, but is one that most parties would call "fair.'' He says the bill will be considered before the full Senate next month.
Texas is suing a pawn shop chain, claiming it "systematically'' exposed customers to identity theft. Attorney General Greg Abbott's office says investigators found several EZ-Pawn stores in San Antonio and other cities had dumped business records. The documents included promissory notes and bank statements with names, addresses and social security numbers. Abbott's office says the records were found in trash bins behind some stores. The suit also names Austin-based EZ-Corp Incorporated, of which EZ-Pawn is a subsidiary. Investigators found evidence that documents were thrown out at EZ-Pawn stores in Austin, Houston, Lubbock and the Rio Grande Valley. EZ-Corp didn't immediately comment. Those named in the lawsuit are accused of violating the Texas Deceptive Trade Practices Act, the 2005 Identity Theft Enforcement and Protection Act and Chapter 35 of the Business and Commerce Code.
Dynegy says it swung to a first-quarter profit after logging a loss a year ago. The Houston-based electric power producer credits heavy demand and higher prices in the northeastern United States for living its earnings. Net income for the January-March period amounted to $14 million. That's compared to a first-quarter loss last year of $4 million when legal charges hurt the bottom line. Revenue fell 4.5 percent to $573 million. During the quarter, Dynegy completed its $4.1 billion acquisition of rival LS Power Group's generating capacity. Dynegy says the deal says gives it more stability in the volatile industry by providing greater diversity in both geography and the fuels used to generate electricity. The company has said the combination increases Dynegy's assets by 70 percent while boosting costs only 14 percent.
El Paso Corporation said its first-quarter profit nearly doubled. The Houston-based pipeline operator says its earnings got a boost from a hefty gain on the sale of ANR Pipeline Company. Net income after paying preferred dividends rose to $620 million. The latest period includes a gain on the sale of ANR pipeline and related assets, as well as a $128 million charge for debt repurchase costs. The company posted a loss from continuing operations of $48 million. That's compared with profit a year ago of $301 million. Revenue slipped 24 percent to $1.02 billion.
Tenet Healthcare Corporation said its first-quarter profit rose seven percent, helped by a hefty income tax-related gain and a slight rise in revenue. The Dallas-based health care services provider reports that net income grew to $75 million. Income from continuing operations was $93 million. Revenue rose three percent to $2.28 billion. Analysts surveyed by Thomson Financial were looking for of $2.26 billion.
Why Hewlett Packard has issued an update to its financial outlook is almost as interesting as the outlook itself. HP cites strong demand for personal computers and servers as it gives the fiscal second-quarter outlook a slightly better tone. The period ended April 30th. HP says an internal e-mail with financial details of the quarter was accidentally sent to someone outside the company. HP says it expects to formally release the financial report a week from Wednesday.
GE Energy Financial Services has partnered with two energy development companies to acquire oil and gas reserves in Oklahoma and Texas. The price was $154 million. With Bays Exploration, the GE unit paid $79 million for oil and gas reserves in western Oklahoma with significant development opportunities. GE also said it will invest up to $60 million to develop the reserves. In a second transaction, GE Energy Financial Services partnered with Southern Bay Energy, a subsidiary of Georesources, to acquire east Texas oil and gas properties. The price was $75 million. GE Energy Financial Services plans to invest another $27 million to develop these properties.
Pier One Imports is recalling about 180,000 pieces of red and orange glassware because it can too easily crack or break. The Fort Worth-based interior decor retailer says this poses the risk of cuts. The company has received 17 reports of unexpectedly broken or cracked glassware and one report of an injury. Details are available by phone at 800-245-4595, or by Web from Pier One or the Federal Consumer Products Safety Council.