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Texas Border EconomyTexas Border EconomyJames P. Gaines, Luis Torres, Wesley Miller, and Bailey Cuadra2017-08-11T05:00:00Zresearch-article
Texas Economy

​June 2017 ​Border Summary

Strong employment growth and increased international trade stimulated economic activity along the border. Housing sales along the Texas-Mexico border continued to increase as demand strengthened. Housing affordability improved in El Paso, Laredo, and McAllen, but declined in Brownsville.

Econ​​omy

The Laredo Business Cycle Index trended upward at 2.0 percent annualized growth as low unemployment overpowered falling wages. Economic activity slowed for the eighth consecutive month in McAllen, despite recent employment growth and rising wages. Lagging economic growth in McAllen has likely been affected by retail sales, which fell 11.0 percent year-over-year in the closing quarter of 2016. The El Paso index increased to 3.5 percent annualized growth, while Brownsville sustained positive growth at 0.3 percent.

Total border construction values stabilized after last month's fall, increasing 3.9 percent. Investment in nonresidential construction remained strong as Brownsville, El Paso, and McAllen continued to see positive year-to-date growth in this sector. In Laredo, nonresidential construction values fell, overpowering gains in residential construction. In contrast, total border residential construction values declined 2.4 percent.

Border employment increased 2.0 percent annualized, adding 3,200 jobs1 in June. In El Paso, employment growth slowed for the second consecutive month to 1.8 percent but remained strong overall. Brownsville's annualized employment growth rate, which fell below zero in April, remained steady at 0.6 percent. Meanwhile, McAllen posted the strongest job growth amongst the border economies at 3.4 percent. Recent job growth in McAllen came primarily in the service providing industry, specifically in the education and health services sector. These industries also drove employment growth in Laredo, which climbed from 0.6 percent in May to 1.3 percent in June.

The unemployment rate1 fell below pre-recessionary levels in Laredo to 4.3 percent and in El Paso to 4.7 percent. Additionally, unemployment decreased to 7.4 percent in Brownsville and 7.9 percent in McAllen, recovering from the first-quarter uptick. While unemployment may seem high in Brownsville and McAllen, border MSAs generally maintain a higher rate relative to the state.

In McAllen and El Paso, real private hourly earnings increased year-over-year by 7.1 percent and 2.6 percent, respectively. Wages declined in Brownsville and Laredo, falling 7.2 percent and 9.9 percent year-over-year, respectively. However, Brownsville's wage losses stabilized after a 12-month decline, exhibiting 0.1 percent month-over-month growth.

The peso per dollar exchange rate1, an important determinant of border economic performance, appreciated 3.4 percent to $18.13. While a weaker peso can benefit some sectors of the economy, currency fluctuations do not necessarily reduce the aggregate trade volume that crosses the border. The total value of trade activity crossing the border decreased 0.3 percent month-over-month but trended upward at 4.3 percent year-over-year growth. Import values increased 0.2 percent but were offset by declines in export values. The healthy Mexico economy and stronger peso should begin to stimulate exports in the coming months.

Hou​sing

Following a first quarter increase, the number of single-family residential housing construction permits issued fell for a third consecutive month in El Paso. Brownsville issued the least amount of housing construction permits but still exhibited a 12.2 percent year-to-date growth. Meanwhile, the number of housing construction permits issued in Laredo remained essentially flat, falling 0.7 percent. McAllen permits increased 10.0 percent, recovering all the April and May losses. In El Paso and Brownsville, single-family private construction values increased by 7.9 percent and 3.9 percent, respectively. Private construction values in Laredo continued to rise, while private construction values in McAllen fell for the fifth consecutive month.

New home months of inventory (MOI) expanded for each border economy with Brownsville (7.6 months) and McAllen (12 months) posting the largest monthly increases. New home MOI is characteristically high along the border relative to the statewide average, particularly in Brownsville and McAllen. The supply of new homes listed increased in Laredo after a six-month decline, settling at 3.3 months. While the supply is significantly lower relative to the other border economies, the average new home MOI in Laredo since January 2011 is 3.5 months. The supply of new homes listed in El Paso increased 5.1 percent year-over-year to 7.3 months.

The Existing home MOI in El Paso (4.8 months) has decreased 33 consecutive months and fallen 12.4 percent year-to-date. The MOI for existing homes in Laredo (5.9 months) continued to expand, increasing 12.2 percent year-to-date. In Brownsville, the supply of existing homes fell for the second consecutive month to 8.3 months, while the existing MOI in McAllen remained at 8.8 months.

Housing sales along the Texas-Mexico border increased 1.1 percent to reach a series high (series began in January 2003). During August of 2011, border home sales fell to a trough but have steadily recovered since. Individually, housing sales in McAllen and El Paso increased year-over-year by 12.6 percent and 9.9 percent, respectively. In Brownsville, home sales increased slightly by 1.5 percent, while falling 2.5 percent in Laredo.

Demand for existing homes remained strong for the border as the average number of days on market (DOM) decreased in Brownsville (108 days), El Paso (88 days), and McAllen (99 days). In Laredo (59 days), the average number of days on market increased 2.3 percent as demand softened but remained high for the year.

Demand for new homes in El Paso softened as the average number of days on market increased from 68 days in May to 86 days. Demand strengthened in Brownsville, where the new home DOM fell to 94 days. In Laredo, demand trended upward as the average days on market fell 1.6 percent to 124 days. Demand remained strong in McAllen at an average of 83 days on market, which was well below its 2016 average of 98 days.

In McAllen, the median price and median price per square foot (mppsf) for new homes was $161,780 and $100.02, respectively. In contrast to the other border economies, prices for newly built homes in McAllen maintained positive year-to-date growth as strong demand exerted upward price pressure. Laredo maintained the highest home prices in both the new and existing housing market at $172,227 and $156,089, respectively. However, median price for new homes in Laredo decreased 7.1 percent month-over-month. The median housing price in the resale market fell in El Paso ($131,293), as demand for these homes fell. Median prices in Brownsville remain steady for both the new and existing home market.

While statewide housing affordability fell in the second quarter, affordability on the border experienced a slight uptick. However, affordability in Laredo remained below the statewide average and continued depressed from falling wages. Housing affordability in Brownsville fell for the second consecutive quarter as employment growth remained weak and wages decreased. Improved wages in El Paso and McAllen relieved affordability tensions as these border cities surpassed the statewide average.

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1 Monthly numbers are reported instead of a three-month moving-average for consistency.


 




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Texas Border EconomyTexas Border EconomyTexas Economy
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