A strong U.S. economy and rising energy prices supported growth in the Texas economy. Texas crude oil production reached a cycle-high as global trade factors tipped in the state’s favor. The bomb-cyclone storm jolted the demand for utilities but stifled activity in the service sector. Texas created 16,000 jobs amid solid growth in the goods-producing sector. The labor market tightened further, driving the economy towards full employment. Potential headwinds to the Texas economy include decreased housing affordability, energy price volatility, and trade uncertainty.
The Texas economy advanced as the Dallas Fed’s Business-Cycle Index (a measure of current economic activity in the state) posted 4.8 percent quarterly annualized growth. The metropolitan business cycle indices were positive across the Texas Urban Triangle, led by Austin at 8.0 percent. Dallas and San Antonio maintained solid growth at 4.2 and 3.7 percent, respectively, while rebuilding efforts supported 5.7 percent growth in Houston. Meanwhile, weaker job creation in Fort Worth slowed the index to 1.8 percent.
The Texas Leading Economic Index (a measure of future directional changes in the business cycle) reached a two-year high amid higher oil prices, gains in the U.S. leading index, and declines in the Texas value of the dollar (a weight on Texas export competitiveness). Despite lagging wages, the Texas Consumer Confidence Index jumped 13.3 points as the business-cycle expansion continued.
Robust U.S. and global economic growth heightened inflation expectations and elevated interest rates. In their January meeting, the Federal Reserve Board hinted at three federal funds rate hikes this year as the national economy hovered around full employment. The ten-year U.S. Treasury bond yield rose 18 basis points to 2.58 percent, its largest monthly gain in over a year. The Federal Home Loan Mortgage Corporation 30-year fixed-rate jumped above 4 percent, maintaining upward momentum. While rates remained low by historical standards, even slight increases could hinder mortgage financing, particularly for first-time homebuyers.
Shortages of homes priced less than $300,000 restrained Texas housing sales to 1 percent growth and heightened affordability challenges. Current residential construction activity, measured by the Residential Construction Cycle (Coincident) Index, inched forward as industry employment expanded. Growth in weighted building permits and housing starts accelerated the Texas Residential Construction Leading Index (RCLI) to its highest level since 2007, signaling improvements in residential construction activity to start the year. On the demand side, economic growth decreased the statewide foreclosure rate to 0.6 percent, down from its 2010 peak of 2.1 percent. (For additional housing commentary and statistics, see Texas Housing Insight at recenter.tamu.edu.)
The average West Texas intermediate crude oil spot price increased to $63.702, the highest since 2014, driven by robust global demand and diminishing U.S. stockpiles. The number of active rigs in Texas rose to 4562, up 35.7 percent year over year, as activity accelerated in both the Permian and Eagle Ford Basin. Higher crude oil prices pushed Texas production above 3.9 million barrels per day2, accounting for 41 percent of national output. The opening of the Midland-to-Sealy Pipeline in November 2017 improved the regional supply chain and is scheduled to expand operations this year. The Henry Hub natural gas spot price jumped 14.4 percent to $3.69 per million BTU2 (British thermal units) after the bomb-cyclone storm lingered in the southern and northeastern United States but normalized later in the month.
Texas monthly nonfarm employment added 16,000 jobs led by growth in the goods-producing sector. Theunemployment rate held at 4 percent, slightly below the national level, while metropolitan unemployment balanced even lower. Houston was the exception with unemployment above 4 percent but remained below its 5.8 percent long-run average. Reduced initial unemployment insurance claims corroborated the general labor force tightening and could drop the unemployment rate even lower. Data revisions indicated an improved labor force participation rate at 63.4 percent, rather than slipping below 63 percent as previously reported. An aging workforce, however, continues to pressure labor force participation downward throughout the nation.
At the Texas metropolitan level, Houston added the most jobs at 5,300, primarily from gains in education, health services, and the energy sector. Austin had the largest proportional increase at 0.5 percent, as retail jobs stabilized after a six-month decline. Manufacturing rebounded in San Antonio after a fourth-quarter slide last year, balancing total monthly growth at 1,600 new jobs. North Texas employment stagnated for the second straight month as professional-business services and wholesale trade hindered Dallas and Fort Worth, respectively. The sluggish stint, however, should be transitory as the region’s economic expansion generated the most job creation across the state in 2017.
Statewide, the goods-producing sector added 7,200 jobs as higher oil prices boosted energy sector activity. The manufacturing sector improved, adding 2,400 jobs, but could stagger amid potential U.S. tariffs on foreign steel and aluminum. Manufacturing job growth hovered around 3 percent (quarterly annualized) in Austin, Dallas, and Fort Worth, followed by Houston at 1.5 percent.
The Dallas Fed’s Texas Manufacturing Outlook Survey noted positive, yet slowing employment trends in the industry. The production index extended a 19-month upward trend with 25 percent of companies increasing capital expenditures. Companies revealed reinvestment plans following the recent tax cuts and favored the weakened value of the dollar. Skilled labor shortages remain the primary complaint across the manufacturing sector.
Rebuilding efforts along the Gulf Coast propelled construction employment growth above 11 percent (quarterly annualized). The total value of Texas construction rose 2.4 percent on a three-month moving average after sliding through most of 2017. Multifamily residential construction accounted for most of the monthly uptick, followed by school and hospital construction. Additionally, hotel and motel investment poured into all the major metros except Austin.
Texas’ service-providing sector inched forward, creating 8,800 new jobs, nearly 30,000 less than a year ago. Steady contractions in retail trade and the information sector hindered this month’s expansion. The Texas Service Sector Outlook Survey corroborated lackluster employment growth as all the labor indices decelerated. The revenue index fell sharply after the cold front stormed through the state early in the month. Respondents expressed concerns regarding NAFTA renegotiations and the lack of the H-2B visa “returning worker” exemption.
The cold weather disproportionately affected the retail industry, resulting in 2,400 lost jobs. The Texas Retail Outlook Survey reflected the seasonal impact as the sales index crashed 28.8 points into negative territory, while the future business conditions indices held firm. Labor market tightness forced retailers to compete for the limited supply of skilled workers through wage and benefit increases.
Despite low unemployment levels, employee compensation remained stagnant as real Texas private hourly earnings fell 0.8 percent, pulling YOY growth into negative territory. Houston and San Antonio wages suffered disproportionately, contracting more than 3 percent YOY. Hourly earnings fell 0.3 and 0.4 percent YOY, respectively, in Austin and Fort Worth. Dallas remained the exception with 2.1 percent YOY wage growth but showed signs of slowing.
While Texas wages lagged the national level by $0.44, Texas manufacturing jobs paid a 10 percent premium in hourly earnings relative to U.S. average. Fort Worth had the highest manufacturing wages, paying 47.1 percent more than the statewide average but dipped 3.6 percent YOY. Manufacturing earnings were relatively unchanged in Houston and Dallas compared to January 2017. San Antonio remained the outlier for manufacturing wage growth, rising 14.4 percent YOY but remained 15.4 percent below the Texas average.
The U.S. Consumer Price Index (CPI) surpassed 2 percent growth YOY for the fifth consecutive month as cold weather elevated energy costs. The core inflation rate, which excludes the often-volatile energy and food sectors, approached the 2 percent YOY benchmark amid rising medical care and transportation prices. The Dallas CPI was higher at 2.7 percent YOY after balancing above 3 percent in 4Q17. Affordable housing constraints pushed Dallas residents into the rental market, where prices inflated 5 percent YOY.
Increased trade in transportation equipment and primary metal manufacturing held Texas total commodity and manufacturing exports near record levels, despite a pause in the petroleum industry. Bolstered by higher oil prices,Texas crude oil exports increased 167 percent YOY and accounted for 87 percent of the national total. The Texas trade-weighted value of the dollar3 extended its downward trend, falling 8.8 percent YOY and boosting the attractiveness of Texas goods and services to foreign consumers.
Strong global economic growth and the falling value of the dollar should support export growth early this year. Mexican and Canada received nearly half of January exports, remaining Texas’ primary trade partners. This trilateral relationship highlights the importance of a successful NAFTA renegotiation. The potential of increased tariffs and global trade conflicts present an additional headwind to Texas trade activity.
3 The Texas trade-weighted value of the dollar is generated by the Federal Reserve Bank of Dallas. Its release typically lags the Outlook for the Texas Economy by one month.
WASHINGTON, D.C. (WalletHub) –
Texas has the sixth-highest property tax rate in the nation, according to online financial website WalletHub.
The Lone Star State’s tax rate is 1.86 percent, WalletHub says, putting it behind New Jersey (2.4 percent), Illinois (2.32 percent), New Hampshire (2.19 percent), Connecticut (2.02 percent), and Wisconsin (1.95 percent).
To rank the states, WalletHub compared U.S. Census Bureau data for the 50 states and the District of Columbia. Analysts divided the median real estate tax payment by the median home price in each state. They used the resulting rates to obtain the dollar amount paid as real estate tax on a house worth $184,700, the median value for a home in the U.S.
James P. Gaines, Luis B. Torres, Wesley Miller, and Bailey Cuadra (Feb 6, 2018)
2017 Annual Summary
The Texas housing market held steady as sales rose 4 percent, maintaining the current four-year average. Demand remained robust, particularly in the resale market as buyers searched for affordable housing. Rapid home price increase and stagnant wages pared Texas’ affordability advantage, presenting a growing problem throughout the state. Supply conditions showed signs of improvement but failed to relieve pronounced market imbalances, particularly for homes priced below $300,000. Marked shortages will likely continue unless builders shift construction toward this price cohort, a difficult task amid rising land cost and skilled-labor shortages.
In 2018, single-family housing sales are projected to reach 6.6 percent growth before moderating in 2019. Economic acceleration and employment growth in Texas bodes well for housing demand. Price pressures are projected to ease slightly as homebuilders stretch to increase production in the entry- and first move-up markets, where houses generally range between $150,000 and $250,000.
The Texas Residential Construction Cycle (Coincident) Index, which measures current construction activity, accelerated 3.8 percent annually as residential construction values and industry employment advanced. Growth in weighted building permits and housing starts pushed the Texas Residential Construction Leading Index (RCLI) up 3.6 percent, signaling increased residential construction activity in early 2018.
In response to market imbalances, developers accelerated building activity at the earliest stage of the construction cycle. The number of vacant developed lots (VDLs) in the Texas Urban Triangle reached its highest level since 2011, continuing a four-year climb after bottoming out in 2014. In Dallas-Fort Worth (DFW) and Austin, the number of VDLs increased 6.1 and 6.6 percent, respectively, as builders scrambled to satisfy housing demand. San Antonio VDLs reached 2010 levels during steady 3.3 percent growth. Houston also posted 3 percent growth amid a fourth quarter recovery following Hurricane Harvey. Despite recent increases, VDLs were nowhere near pre-recessionary levels in actual or per capita terms.
Similarly, Texas single-family housing construction permits (unweighted) grew 8.2 percent annually but lagged well below their 2006 peak. Permits in Dallas and Fort Worth increased 12.1 and 26.3 percent, respectively, after marginal gains in 2016. Austin recorded similar permit growth at 12 percent. San Antonio permits slid in the fourth quarter but maintained 16.3 percent annual growth. Houston remained the national leader in single-family permits issued, despite more moderate 3.4 percent growth.
Upward trending supply factors supported 4.6 percent growth statewide in single-family private construction values. The boost in VDLs and single-family permits materialized into 11.4 and 7.6 percent growth in Austin and DFW construction values. A sluggish fourth quarter weighed on San Antonio, but early gains led to 6.4 percent growth annually. Houston single-family construction values stabilized, ticking up 1.2 percent after two straight annual contractions. Residual building stimulus from the hurricane recovery should support further growth into 2018.
After dipping in 2016, total Texas housing starts finished the year up 3 percent—slightly above the 2.4 percent national rate. Market forces pulled construction activity from the saturated multifamily sector to the undersupplied single-family industry. At the national level, housing starts fell 9.3 percent for multifamily homes, while rising 8.4 percent in single-family construction. In DFW, the building boom continued as single-family starts rose 10.8 percent, the sixth-straight year of double digit growth. Single-family starts in San Antonio and Houston posted their strongest gains since 2014 at 10 and 8.2 percent, respectively. After spiking 29.5 percent last year, Austin maintained elevated single-family start levels, leading the state in per capita terms. Despite these supply-side shifts, builders struggled to fully satisfy single-family demand amid rising costs and skilled-labor shortages.
Growth in supply factors did not keep pace with housing demand, thereby magnifying market imbalances. The Texas months of inventory (MOI) settled at 3.7 months after a 9 percent slide in the second half of the year; a MOI around six months is considered a balanced housing market. Fewer active listings combined with constant demand pressure prevented inventory levels from expanding. The MOI remained particularly constrained for homes priced under $300,000, where the supply of active listings bottomed out around three months, marking the closest resemblance to stabilization this decade. Consequently, rampant demand spilled over to the higher-end markets, where inventory levels were more sustainable.
Inventories stabilized in both the new and existing home market. The Texas MOI for existing homes ticked up to 3.4 months, its first annual increase since the data series began in 2011. In the new home market, the MOI held steady around its three-year trend of five months. However, the current balancing could be transitory as inventories in trended downward in both markets during the second half of the year.
Statewide, North Texas observed the tightest housing supply. Fort Worth maintained the lowest inventories at 1.9 and four months for existing and new homes, respectively, followed by Dallas at 2.1 and 4.4 months. Austin inventories showed signs of improving, surpassing 8 percent growth for both resale (2.1 months) and new home MOI (4.7 months), respectively. In contrast, inventory levels continued to decline in San Antonio to 3.1 and 4.5 months in the existing and new home markets, respectively. The supply of resale homes was similarly constrained in Houston at 3.4 months, while the new home MOI remained at more balanced levels above five months.
Total Texas housing sales managed 4 percent annual growth, outpacing the national rate for the second straight year. Sales increased uniformly across the state, rising between 3 and 4 percent in all the major metros except Houston. Sales in Houston slowed abruptly during the summer months and after the hurricane but recovered enough to match last year’s growth rate at 2.6 percent.
In the new home market, disappointing fourth quarter sales volume drove Houston’s annual growth rate below zero for the third straight year. On the other hand, positive year-end performance in DFW and San Antonio pushed annual new home sales up 12.7 and 6.1 percent, respectively. In Austin, new home sales activity decelerated but maintained 6.1 percent annual growth.
Rapid price increase and supply constraints shifted the sales distribution away from the lowest price cohort (homes priced under $200,000), where sales accounted for 41 percent of homes sold through a Multiple Listing Service (MLS)—down from 68 percent in 2011. Every other price cohort posted double-digit annual growth, led by homes priced $300,000–$400,000 at 16.3 percent.
After sinking to a record low last year, the homeownership rate in Texas and the nation ticked up to 63.8 and 61.7 percent, respectively. The recent rise in home purchases by Millennials relieved some of the downward pressure associated with an aging population. Of the Texas major metros, San Antonio maintained the highest homeownership rate at 62.3 percent, followed by Dallas at 61.8 percent. Homeownership in Austin and Houston dwindled to record lows of 55.6 and 58.9 percent, respectively.
Texas housing demand remained robust as the average days on market (DOM) hovered at 58 days for the third consecutive year. Homes priced $200,000–$300,000 sold the fastest, averaging 52 days on the market, while homes under $200,000 averaged just over 60 days. Demand was softer in the top price cohort (homes priced above $500,000), where homes sold on average after 88 days, down from 118 days in 2011.
Resale demand reached an all-time high as homebuyers searched for lower-priced alternatives. The existing home days on market remained historically low at just 52 days. Rising prices pulled many prospective buyers into the resale market. In Dallas and Fort Worth, the resale DOM settled at 32 and 34 days, respectively, amid soaring home values. In San Antonio, the average existing home sold after 50 days, nearly half the average in 2011. In contrast, the resale DOM in Austin and Houston expanded for the second straight year to 43 and 48 days respectively, indicating a slight softening of demand.
New home demand balanced on a three-year trend in Texas, averaging 90 days on the market. The lack of new home inventory and rising prices challenged the Austin market, holding the DOM at 99 days. Despite higher inventory levels in Houston, new home demand was also soft with an annual DOM of 95 days. New home demand eased in San Antonio, particularly late in the year, pushing the DOM up to 86 days. New homes sold fastest in Dallas and Fort Worth, averaging 82 and 76 days on the market, respectively.
Interest rates closed the year on a high note after U.S. legislators passed tax legislation, and the Federal Reserve raised the federal funds rate for a third time in 2017. Investors sold off bonds in expectation of rising inflation and further interest rate increases. The ten-year U.S. Treasury bond yield increased nearly half a percent annually, settling at 2.33 percent. As expected, the Federal Home Loan Mortgage Corporation 30-year fixed-rate ticked up similarly to 3.99 percent, mirroring changes in the ten-year bond yield. Rates remained low by historical standards but showed signs of trending upward.
The health of the Texas economy combined with housing supply constraints elevated home prices to record levels. The median sale price increased by more than $13,000 to an annual average of $222,106, with home values appreciating across the state. Most of the price pressure occurred in the resale market, where the statewide median jumped 6.8 percent to $211,844. The resale median price was highest in Austin at $291,904, but North Texas posted the largest percentage growth. In Dallas ($266,775) and Fort Worth ($210,100), the median resale price rose 9.3 and 11.9 percent, respectively, as single-family demand boomed. Price increase was more modest in Houston and San Antonio, but they also recorded annual records with a median resale price of $216,467 and $199,583, respectively.
Softer demand and more sustainable inventory levels held new home prices to moderate growth. The median price for new homes sold through an MLS ticked up only 1.4 percent to $290,662. Similarly, new home prices in the major metros increased modestly compared to the resale market. Dallas maintained the highest median price at $351,559, up 2.2 percent over the year, while the Fort Worth median approached $300,000. The median price for new homes in Austin rose to $316,088, just $15,000 higher than the resale median. In Houston and San Antonio, new home prices actually depreciated, falling to $305,422 and $257,635, respectively.
In terms of price per square foot (ppsf), the new home median rose 3.2 percent as homebuilders reduced square footage amid rising land costs and burdensome regulations. The median lot size for new homes fell for the third consecutive year to 2,373. In contrast, the statewide median ppsf for existing homes accelerated 6.3 percent, surpassing $106 for the first time in series history.
At the metro level, Austin led the state in median ppsf for both new and existing homes at $140.94 and $145.04 ppsf, respectively, and was the only major metro to pay a premium for existing-home square footage. However, the median ppsf for existing homes in Dallas jumped 9.3 percent to $123.87, a little less than six dollars below the new home ppsf. The spread between new and existing ppsf was wider in the remaining metros but continued to converge. The median new home ppsf settled at $121.15 and $119.23 in Fort Worth and San Antonio, respectively, while the resale ppsf rose to $108.04 and $104.79. The median ppsf was lowest in Houston at $116.03 and $100.21 for new and resale homes, respectively.
The Texas sale-to-list price ratio hovered around 0.96 in both the new and resale home market. New home ratios inched down in all major metros except Houston, indicating slightly weaker demand. For existing homes, Dallas and Fort Worth recorded sale-to-list price ratios around 0.98 as homes continued to fly off the market. Austin and Houston posted slight dips to 0.97 and 0.95, respectively, but remained historically high. In general, elevated sale-to-list price ratios across the state indicated a continuing sellers’ market across the housing spectrum.
Texas housing affordability remained favorable compared to other stats but continued the steady decline that began in 2013. Rapid price increase, fueled by shortages of homes priced under $300,000, challenged Texas buyers. Stagnant wages failed to keep pace with home values, driving the Real Estate Center Affordability Index to 1.5, its lowest level since the housing crisis. The index indicated that a family earning the median income could afford a home 50 percent more than the median sale price. For much of the past decade, Texans enjoyed the capability of affording homes priced twice that of the median. Fort Worth and Houston boasted the highest affordability conditions at 1.8 and 1.7, respectively, but had substantial declines over the past year. In Austin and Dallas, affordability fell below 1.5 amid rampant home price increases. San Antonio fared similarly with a significant drop in the affordability index from 2.4 to 1.6.
Furthermore, the Explosive Behavior Map indicated a misalignment in North Texas home prices relative to their fundamental-based normative values. This behavior stretched south into Waco and College Station-Bryan. Recent price movements in the remaining major metros, as well as in Midland, also warrant careful attention
According to the Real Estate Center’s latest Monthly Review of the Texas Economy, the nongovernment sector added 269,500 jobs, an annual growth rate of 2.6 percent, also higher than the nation’s employment growth rate of 1.6 percent in the private sector.
Texas’ seasonally adjusted unemployment rate in December 2017 was 3.9 percent, lower than the 4.8 percent rate in December 2016. The nation’s rate decreased from 4.7 to 4.1 percent.
All Texas industries except the information industry had more jobs. The mining and logging industry ranked first in job creation followed by other services industry, manufacturing, construction, financial activities, leisure and hospitality, and professional and business services.
All Texas metro areas except Texarkana, Brownsville-Harlingen, Beaumont-Port Arthur, and Waco had more jobs. San Antonio-New Braunfels ranked first in job creation followed by Midland, College Station-Bryan, Austin-Round Rock, Corpus Christi, and Fort Worth-Arlington.
The state’s actual unemployment rate in December 2017 was 3.7 percent. Amarillo and Midland had the lowest unemployment rate followed by Austin-Round Rock, College Station-Bryan, and Lubbock.
Jan 19, 2018
SAN ANTONIO – The area’s growing economy propelled the local housing market to another record sales year in 2017, but the supply of homes on the market remains extremely tight.
Home sales in the San Antonio-New Braunfels metro area increased by 3.8 percent in 2017 to a record 30,715, up from 29,596 in 2016, according to data released from the San Antonio Board of Realtors.
The median sales price climbed 4.9 percent to a record high of $214,300, up from $204,300 the year before.
High demand, a labor shortage and rising construction costs are driving up prices, experts say.
The local area’s inventory of available homes dropped to 3.1 months in December, which matches the record low set in December 2016.
Read more at mysanantonio.com
Dec 18, 2017
LIVE OAK, BEXAR COUNTY – IKEA completed its acquisition of 30 acres in Live Oak, and construction of its future 300,000-sf store is scheduled to begin March 2018.
The estimated $30 million project is expected to be completed in March 2019.
Following IKEA’s acquisition, real estate firm Weitzman announced it will start construction immediately on the Live Oak Town Center, of which IKEA will be the anchor tenant.
In addition to IKEA, the shopping center will have about 530,000 sf of retail, restaurant, entertainment and hospitality space.
The first phase will deliver in late 2019.
Read more at the San Antonio Business Journal
Oct 17, 2017
SAN ANTONIO – Despite challenges facing the oil and gas industry, advances in technology and improvements in efficiency continue to drive well costs down and keep the industry competitive.
That is according to executives who spoke at the Society of Petroleum Engineers’ Annual Technical Conference and Exhibition in San Antonio.
Drilling and completion costs are down about 40 percent from the peak of the oil boom, which came in mid-2014 at $107 per barrel before crashing to $26 by early 2016.
New wells in the first 90 days produce 4½ times the amount of oil—in the same area—as wells drilled five years ago.
Also, real-time monitoring of wells means that companies know exactly what’s going right or wrong at a particular well site.
National oil production in 2018 is expected to reach around 9.9 million barrels per day, and the Energy Information Administration expects the U.S. to become a net exporter of natural gas in 2017.
Read more at the San Antonio Express-News
The Texas economy advanced amid increased energy activity and a strong labor market. Oil production and the number of active rigs in Texas increased, stimulating 6,600 new mining and logging jobs despite the price of oil falling to its lowest point this year. Single-family housing and nonresidential construction across the state supported higher construction values and created 3,400 construction jobs. These gains dragged down the statewide unemployment rate and sparked hourly wage increases. Overall the Texas economy remained robust, but trade uncertainty (especially with Mexico), volatile energy prices, and tax policy uncertainty present potential headwinds.
The Texas Business Cycle Index (a measure of current economic activity in the state) increased 3.7 percent year-over-year, indicating continued economic expansion. The major metro Business Cycle Indices indicated similar year-over-year growth throughout the Texas Urban Triangle. Economic activity accelerated for the fifth straight month in Houston, solidifying its recent economic recovery. The Dallas and Fort Worth indices posted the strongest growth, increasing at a quarterly annualized rate of 3.7 percent and 3.3 percent, respectively.
The Texas Leading Economic Index (a measure of future directional changes in the business cycle) flattened but maintained positive year-over-year growth. The overall health of the Texas economy balanced the index against falling oil prices. The Texas Consumer Confidence Index declined by over 8.0 percent for the second consecutive month, eliminating all of its post-election gains. Stagnant wages weighed on Texans’ confidence, but have hardly impacted consumption spending.
Multiple components generated interest rate fluctuations in May. In the beginning of the month, European political anxiety waned, elevating the ten-year U.S. Treasury bond yield to a peak of 2.42 percent. However, tensions in Washington offset this increase and dragged the yield to a monthly average of 2.3 percent. The Federal Home Loan Mortgage Corporation 30-year fixed-rate fell to 4.0 percent, despite the Fed’s 25-basis-point increase in the federal funds rate. Lower interest rates could ignite stronger demand and simultaneously stimulate residential construction.
Texas housing sales increased 8.7 percent (seasonally adjusted) after dipping last month. Current construction activity, measured by the Residential Business Cycle (Coincident) Index, was steady as construction worker wages and employment increased. The Residential Construction Leading Index (RCLI) flattened after large increases earlier this year, indicating a stabilization at the current level of activity. (For additional housing commentary and statistics, see Texas Housing Insight at recenter.tamu.edu)
The average West Texas Intermediate crude oil spot price fell to a nonseasonally adjusted six-month low of $48.48 despite OPEC’s extended production cuts. Booming U.S. production continued to offset OPEC’s market rebalancing measures. The number of active rigs in Texas increased 153.1 percent year-over-year to 4532 and crude oil productionrose above 3.3 million bpd23. The Henry Hub spot price of natural gas rose to $3.2 per million BTU2 (British Thermal Unit) despite saturated inventories. Increased oil drilling, which produces natural gas as a byproduct, contributed to a global natural gas glut. The Energy Information Administration predicts that the U.S. will be a net exporter of natural gas by 2018—the first time in nearly 60 years. Texas remained the largest gas-producing state, accounting for 23.7 percent of national production.
Texas monthly nonfarm employment added 14,800 jobs and kept pace to reach the Dallas Fed’s 2017 forecast of 289,300 new jobs. The statewide unemployment rate fell from 5.0 percent to 4.8 percent, but at the expense of a labor force contraction. The statewide labor force participation rate fell for the first time this year, dropping to 63.9 percent, but maintained positive year-over-year growth. Despite this blip, the number of initial unemployment insurance claimsremained at pre-recessionary levels, reinforcing the labor market’s strength.
The unemployment rate fell in every major Texas MSA for the second straight month. Austin boasted the lowest rate at 3.4 percent, followed by San Antonio at 3.9 percent. Dallas and Fort Worth both settled at 4.0 percent, while Houston experienced a 3 point drop to 5.4 percent. This downward trend, concurrent with recent employment growth, indicates labor force expansions throughout the major metros.
Dallas and Fort Worth led employment growth, adding 13,700 and 5,200 jobs, respectively. The number of jobs was unchanged in Austin and fell by 100 in San Antonio. Houston employment growth rose for the ninth consecutive month, supported primarily by an upswing in manufacturing and leisure/hospitality industries. Houston added over 37,000 jobs year-to-date, more than doubling the 2016 annual increase.
The goods-producing sector accounted for 80 percent of Texas nonfarm employment growth. The mining and logging subsector led the charge with 6,600 new jobs, while manufacturing posted a 1,800 job increase. The manufacturing employment percentage surged in Houston and Austin, reaching double-digit annualized growth quarter-over-quarter. The Texas Manufacturing Outlook Survey’s corroborated the industry expansion, as the production index hit a 3-year high. The hours worked and wage indices jumped 9.8 percent and 5.5 percent, respectively, and expectations soared even higher.
Construction activity accelerated, generating nearly a quarter of May’s nonfarm employment growth. Statewide construction values rose 11.5 percent on a three-month moving average (3MMA) as single-family and non-residential construction advanced. Population growth stimulated construction activity as new hospitals in Austin, Dallas, and San Antonio drove up construction values. Dallas benefitted from major investments in two-family housing and steady growth in single-family residential construction. In Houston, major increases in retail, warehouses and office buildings elevated construction values.
In Texas, the services-providing sector returned to flat growth, ticking up less than a tenth of a percent. The financial sector added 3,000 jobs, led by gains in Houston and Austin, but statewide declines in education and health care negated most of the growth. In contrast, the Texas Service Sector Outlook Survey was increasingly optimistic. Increased sales activity elevated the employment and wage indices, but respondents noted frustrations regarding burdensome taxes and regulations impeding potential growth.
Retailers expressed less optimism in Texas Retail Outlook as the retail sales and business activity indices decelerated. The employment and hours worked indices dipped below 0 and part-time employment increased, suggesting business could be slowing. The hard data confirm retail labor market struggles, where over 18,000 jobs were lost statewide since February. However, decreased optimism contradicts the steady upward trend in actual retail sales4.
Despite low levels of unemployment, Texas real personal income per capita contracted 0.4 percent year-over-year, falling further behind the national level. However, recent increases in wages and salaries, particularly in energy related industries, suggest a possible convergence. Total private employee hourly earnings in Texas rose 2.9 percent year-to-date and showed no signs of slowing. Wage growth was apparent in San Antonio, where hourly earnings increased 2.0 percent from last year, while Austin posted 1.0 percent year-over-year growth. Only recently have earnings picked up in Dallas, where the hourly rate increased 2.8 percent since February. Despite strong employment growth, falling wages continued to plague the Houston and Fort Worth economies, where hourly earnings declined 1.8 percent and 2.2 percent year-over-year, respectively.
Texas manufacturing jobs paid an 11.2 percent premium in hourly earnings relative to the national average. Fort Worth had the highest manufacturing wages, paying 65.6 percent and 49.0 percent more than the national and statewide averages, respectively. Manufacturing earnings surged in San Antonio, where the hourly wage increased 18.0 percent from last year, but remained 8.4 percent below the Texas average.
The U.S. Consumer Price Index (CPI) fell below the Fed’s 2.0 percent benchmark amid a 6.4 percent drop in gasoline prices. The core inflation rate, which excludes the often-volatile energy and food sectors, rose marginally at 0.1 percent. The CPI for Dallas fell to 2.1 percent as food, beverage, and apparel prices offset transportation and housing price inflation. The Federal Reserve considered falling prices to be transitory and remained on track to further raise the federal funds rate.
The real goods trade deficit decreased 1.6 percent as U.S. commodity export growth outpaced import growth by $1.0 billion. Total Texas commodity and manufacturing exports increased 2.5 percent and 4.0 percent, respectively, led by computer and electronic product sales. The Texas trade-weighted value of the dollar5 fell 5.1 percent year-to-date, providing favorable export conditions. Mexico remained Texas’ main trading partner, accounting for 36.4 percent of Texas exports year-to-date.
1All monthly measurements are calculated using seasonally adjusted data, and percentage changes are calculated month-over-month, unless stated otherwise.
3Crude oil production data lag this report by one month.
4The Federal Reserve Bank of Dallas seasonally adjusts Texas nominal retail sales data and the data release typically lags the Outlook for the Texas Economy by one month. The series is converted into real terms using the Consumer Price Index.
5The Texas trade-weighted value of the dollar is generated by the Federal Reserve Bank of Dallas. Its release typically lags the Outlook for the Texas Economy by one month.
June 23, 2017—AUSTIN—Texas small land sales volume experienced strong gains in 2016, while the average price per acre declined slightly statewide, according to the Texas Small Land Sales Report released today by the Texas Association of Realtors.
“As our state’s population continues to grow and the footprints of Texas cities expand, the demand for rural land will only increase,” said Vicki Fullerton, chairman of the Texas Association of Realtors. “At the same time, after consecutive years of rapid growth in real estate land prices, prices in many regions have leveled off.”
Texas small land sales volume jumped 14.2 percent annually to 6,992 small land tracts sold in 2016. During the same time frame, the average price per acre dipped 0.3 percent year-over-year to $5,647 an acre. The definition of a “small” land sale varies from region to region but generally is considered to be a land purchase of 200 acres or less. The exception is Far West Texas, where 500 to 8,000 acres qualifies as a small land sale.
Strong small land sales growth was evident throughout most regions, with small land purchases in Far West Texas, Northeast Texas and the Austin-Waco-Hill Country experiencing annual gains of more than 20 percent. Conversely, small land sales in West Texas declined 20.6 percent from 2015.
As demand for small land tracts continued to rise, the average tract size of Texas land purchased declined. In 2016, the average tract size for Texas small land purchases declined three acres from 2015 to 36 acres. Far West Texas and South Texas were the only regions that experienced declines in average price per acre, falling 64.9 percent and 3.9 percent, respectively.
Charles Gilliland, economist with the Real Estate Center at Texas A&M University, commented: “While the Texas land market remains strong, multiple factors are impacting land sales activity throughout the state. Rising prices of irrigated farmland and a sluggish agricultural sector are driving up land costs in the Panhandle, and residual effects of the oil and gas downturn have slowed small land sales activity in West and South Texas. Statewide, shortages in prime land are stifling land price growth as developers consider less desirable land tracts.”
Fullerton concluded: “The wise utilization of Texas land is the bedrock of our state’s economy and quality of life. As Texas continues to experience rapid population growth, it’s important that leaders across our state and within our communities take care to ensure that ongoing land segmentation and development preserves the unique culture of our state’s regions and does not harm essential industries.”
About the Texas Small Land Sales Report
The Texas Small Land Sales Report analyzes small land sales data and trends across seven regions of Texas utilizing survey data aggregated by the Real Estate Center at Texas A&M University. The Texas Association of REALTORS® distributes insights about the Texas housing market each month, including quarterly market statistics, trends among homebuyers and sellers, luxury home sales, international trends, and more.
About the Texas Association of REALTORS®
With more than 110,000 members, the Texas Association of REALTORS® is a professional membership organization that represents all aspects of real estate in Texas. We advocate on behalf of Texas REALTORS® and private-property owners to keep homeownership affordable, protect private-property rights, and promote public policies that benefit homeowners.