Houston is anticipated to have increased traffic, bustling airports and a reduction in new housing in 2024, Jankowski said.
In a nutshell
Despite the avoidance of a recession in 2023, there's an expectation of slower growth in 2024, Jankowski said. National economists have adjusted their forecasts, decreasing the likelihood of a recession in 2024. Nonetheless, Jankowski said he anticipates a slowdown in growth for the upcoming year.
Jankowski said three factors will temper economic growth in 2024:
- Tight labor costs
- Persistent high interest rates
- Turmoil in commercial real estate
In Houston, certain industries are poised for growth while others might face challenges, Jankowski said.
Industries likely to strive are:
- Energy sector: Despite transitioning toward cleaner energy solutions, the energy sector could still add jobs, especially in areas focused on renewable energy or related technologies.
- Manufacturing: Anticipated growth in manufacturing might create job opportunities, contributing positively to the job market.
- Health care: With an expected increase of around 10,000 jobs, the health care sector appears robust, likely due to ongoing demand for health services.
- Construction: Predicted job losses in construction could be due to factors such as reduced government spending, tighter lending standards and ongoing labor shortages.
- Real estate: Tightened lending conditions and challenges in commercial real estate might lead to job reductions in the sector.
- Finance and insurance: This sector might face job losses due to factors such as higher interest rates and a constrained lending environment.
Closer look
In the third quarter of 2023, 35% of households in Houston were able to afford median-priced homes, compared to the first quarter of 2021 when 58% were able to, Jankowski said.
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Jankowski said the market is experiencing a downturn resulting in reduced home sales, prices and overall transaction volumes compared to recent peaks.
There were 109,000 home sales in the Houston region in 2022, compared to 84,000 sales in 2023.
Houston's commercial real estate sector faces tough times with soaring distress due to higher interest rates and falling property values, Jankowski said.
Office vacancy rates are nearly hitting 30% in the city, echoing a nationwide trend of rates surpassing 20%.
New lease deals are slowing down, existing tenants are downsizing instead of renewing leases, and property sales have stagnated, often resulting in buildings selling for much less than their original value, according to GHP data.
Quote of note
Jankowski compared Houston's economic resurgence amid the pandemic recovery to Jamaican sprinter Usain Bolt, emphasizing the rapid and powerful recovery seen after the lockdowns.
"The Houston region has been running at a sprint ever since emerging from the pandemic,” he said.
Looking ahead, Jankowski said he anticipates Houston's economic pace to resemble that of the Kenyan long-distance runner Eliud Kipchoge.
“It's not a sprint; it's a marathon,” he said.
