NO LONGER UNDER THE NATIONAL radar after five-plus years of growth, this border city of 120,000 people (and nearly 700,000 countywide) is the poster town for NAFTA proponents. “Cross-border trade has driven this economy,” says Gary Burch, owner of Gary Burch Construction, a local custom builder for 30 years.

In turn, he says, that growth—primarily in the form of management jobs at more than 150 U.S.- and foreign-owned factories (or maquilladoras) just across the border in Reynoso, Mexico, as well as supplemental supply and service jobs to those industries—has spawned greater demand for health care and higher education, among other services in McAllen. “All together, it's made the area grow like crazy,” he says.

News of McAllen's activity has spread beyond the border town. Five years in the market, Los Angeles–based KB Home is the fifth-largest builder, while Fort Worth, Texas–based D.R. Horton is among the top 10. “It's a phenomenal place to be,” says Myssie Cardenas-Barajas, KB Home's local marketing manager. “There are so many markets to tap into,” including so-called “Winter Texans” (second-home buyers) and retirees in addition to dual-income professionals.

Despite the outside influence, McAllen remains dominated by local, small-volume builders such as Burch; the top 10 builders make up only about 21 percent of all residential permits. Affordability is still under control, home appreciation is climbing slowly, and multifamily permits (after a 137 percent spike in fourth quarter 2004) account for a higher share of total starts.

Perhaps the biggest recent change is the impact of the Texas Residential Construction Commission (TRCC), a new state regulatory agency hoping to wrangle builders and contractors, reduce defect litigation, and keep insurance rates in check. “Texas doesn't require [contractor] licensing, but every builder has to register with the TRCC,” says Alamia, whose chapter will facilitate training. “It will help weed out those contractors who come here because of the boom and then leave. It will benefit the good builders.”

†SOURCE: NAHB/WELLS FARGO HOUSING OPPORTUNITY INDEX

Hotness Ranking: 20 (of 75 markets)
Hotness Ranking: 20 (of 75 markets)
CUSTOM CLASS: This 2,591-square-foot custom home from Gary Burch Construction, with upgrades, is priced at $208,000, an indicator of the McAllen, Texas, market's affordability in spite of significant population and economic growth.
CUSTOM CLASS: This 2,591-square-foot custom home from Gary Burch Construction, with upgrades, is priced at $208,000, an indicator of the McAllen, Texas, market's affordability in spite of significant population and economic growth.

Learn more about markets featured in this article: McAllen, TX.