Texas Leads U.S. in High-Growth Cities

Business Week

A new survey finds the Lone Star State is leading in terms of growth rate and household income. Atascocita, Tex., is No. 1 in the state

Tired of reading about how rotten the real estate market is? Here's some good news that shows that even during the worst of the recession plenty of American cities, towns, and suburbs continue to grow.

One such place is Atascocita, Tex. A mostly residential community 20 miles from Houston, it gained more than 1,800 Houston apartments and households in 2009, an 8% year-over-year increase, according to new data from Little Rock-based data firm Gadberry Group. Over the decade, amenities that have helped attract residents to this wooded locale include Lake Houston, just east of the city; the school district; and proximity to the city of Houston. With new roads in the area under construction, "we're starting to see major industry start to take a look at the area," says Mike Byers, president of the Lake Houston Area Chamber of Commerce.

Migration levels nationwide stayed low last year as homeowners saddled with pricey mortgages stayed put—but there are some positive trends. Research by the Gadberry Group shows that some areas, resisting the effects of the recession, continue to attract both domestic and foreign migrants and, as an effect, bring in new businesses to provide services. While other cities across the U.S. have contracted, these have continued to grow.

Some states are better off than others, though. As thousands of people left places such as New Orleans and Flint, Michigan (the country's two fastest-shrinking cities), in the last decade, communities with the best mix of economic activity, proximity to job centers, and a good environment for families continued to grow. While not entirely spared by the economic downturn (some homes in these areas are now in foreclosure), people continued to move in during 2009.

Texas Grew the Most

Texas came out on top of Gadberry's survey, with four high-growth cities: Atascocita, Katy Mansfield, and Wylie. The report only included areas larger than 10,000 occupied households that met requirements for growth rate, household income, length of residence, and other factors.

Larry Martin, principal of the Gadberry Group, says many of the places with the biggest housing growth at the beginning of the last decade, such as Nevada, Florida, and Arizona, also saw the biggest drop-off since the economy sank. Texas, however, enjoyed relatively strong housing and job markets over the last 10 years, thanks in large part to the presence of major employers in the robust energy business. As of December, the state unemployment rate was 8.3% (lower than the national rate of 10%), according to data from the Bureau of Labor Statistics. It also had the largest state population growth between July 2008 and July 2009, according to a December release by the Census Bureau. "New homes and Texas apartments are still being built and people are still moving into these homes" in Texas, says Martin.

Part of the state's strength, says Mark Mather, a demographer at the Population Reference Bureau in Washington, D.C., is its diversified economy. Main industries include petroleum refining, chemical production, aerospace, and information technology.

Meanwhile, areas that depended on the housing boom are now dealing with high foreclosure rates. Places such as Summerlin South, Nev., which appear in Bloomberg BusinessWeek's slide show of fast-growing cities, gained population but, like the rest of the state, may be dealing with high mortgage default rates.

"If you live by migration, you also die by migration," says Kenneth Johnson, senior demographer at the University of New Hampshire's Carsey Institute. "It doesn't guarantee continued growth."

New Business Opportunities

Migration is typically highest among people in their 20s seeking jobs near large urban cores, but employment opportunities are not the only draw. "Amenities are also important in migrational decisions," says Johnson. Many families consider factors such as schools and recreational amenities like scenic areas and parks.

This is a consideration now in Spring Hill, Tenn., which gained 7,645 households since 2000 as many young families moved to the town for affordable housing and work at the General Motors plant, which is now idle. Dustin Dunbar, chairman of the Spring Hill Economic Development Commission, says this has created demand and opportunity for businesses that provide youth activities and entertainment. "We hope to recruit some businesses to cater to our largest demographics," he says.

While migration in 2010 may remain sluggish, "we'll see a continuation of urban sprawl once the economy bounces back," says Mather.