What's keeping nominal wages down?What's keeping nominal wages down?Luis TorresTorres
For the past year, the U.S. labor market has moved toward full employment. This hasn’t spurred rapid nominal wage growth (Figure 1). The reason is low inflation and dismal productivity growth.​
Nominal Wage Growth
Nominal wages are real wages plus inflation. Nominal wage is measured in dollars, while real wage is measured in purchasing power. Workers care about the real wage because it measures actual purchasing power of goods and services. Firms also care about the real wage because it captures the cost of hiring labor and is determined by productivity.

Why is measuring real wages important? Let's say that nominal wages and overall inflation both go up by 5 percent. That means there is no change in the amount of goods and services you can purchase. In other words, you’re no better or worse off. But if overall inflation would have risen by 7 percent, you would be worse off because you could purchase fewer goods and services. In other words, “inflation ate your raise.”

The phrase “inflation ate your raise” was common during the '70s when inflation was high and obstinate. That's why nominal wages rose at a higher rate during that time. Inflation has systematically trended down since then, accompanied by a decline in nominal wages (Figure 2). Don’t expect a big increase in nominal wages when inflation is currently below 2 percent.
Nominal and Real Wage Growth and Inflation
So how about real wages? Real wage growth peaked during the late '90s, boosted by the surge in productivity. It has since fallen as productivity has declined. Real wages are still increasing (meaning real purchasing power is increasing) but at a lower rate than in the '90s.

Going forward, if productivity does not increase at a higher rate, neither will real wages. This will cause nominal wages to grow basically at the current rate if inflation continues to be low.

Higher productivity means higher real wages, which translates into an increase in purchasing power.​​
Extra! Extra! Read all about it!Extra! Extra! Read all about it!Jim GainesGaines
​​Part of my job as the Real Estate Center's chief economist is to field questions from the media. I receive calls and emails almost daily from reporters with questions about real estate market conditions, especially those pertaining to the state's housing market.

Here is one such e-mail exchange I had earlier this month with a WalletHub reporter who had questions about economic indicators, foreign buyers, interest rates, and millennials.

Is now a good time to buy? What economic indicators should potential buyers be watching?

Yes, now is a relatively good time to buy given low interest rates (with expectations of rates rising in near term), some easing on credit terms and mortgage loan underwriting, and the fact that home prices are increasing fairly rapidly in most areas. The biggest negative to buying is lack of choice due to historically low supply of houses being offered for sale. It would appear that many would-be buyers are discouraged from the lack of available choices, which in turn makes them less likely to sell the house they currently own.

Are foreign buyers driving up the cost of U.S. real estate? Which cities are most affected?

Foreign buyers may affect some neighborhoods or a particular segment, but so far they haven’t had that large of an impact on overall markets. Foreign buyers appear to concentrate primarily on the major urban areas, so their relative impact gets “watered down” due to the overall size of the market. For the most part, foreign buyers tend to operate in the higher-priced market segments, so their impact within a narrow field could be important in the short run in a particular market segment.

How likely is it that the Federal Reserve will increase interest rates in the coming months? How will this impact the housing market?

The Fed is most likely to make only one more rate increase this year, probably in December. So far, the Fed’s interest rate changes have had little impact on the housing market as the ten-year Treasury rate and the 30-year mortgage rate have actually fallen following a Fed funds rate increase. Going into 2018, I don’t think the Fed funds rate changes will have that much impact without more pronounced economic changes in the demand for credit.

Why are millennials still sitting out of the housing market? What can be done to increase homeownership rates for this cohort?

I think the millennials are starting to become more active in the homeownership market partially because they are another year older and moving further into the “normal” life cycle conditions that foster homeownership (i.e. they are getting married and having children).​​​ The millennials we’ve been talking about for the past five years are now approaching 38 or 39 years old.  The 20-somethings are still renters and, yes, there are a lot of them, but the future of the housing market for the next five years is going to be more and more dominated by the so-called millennials.

In evaluating the healthiest housing markets, what are the top five indicators?

Top five indicators (in no particular order): job growth, population growth, family income growth, new home construction, and home prices.

You can read the full WalletHub article here​.
(Don't) Curb your enthusiasm(Don't) Curb your enthusiasmBryan PopePope

Front exterior of house For many homeowners, a home's "curb appeal" is a source of pride. Certainly it is to me, although often the best I can usually hope for is to keep the lawn mowed, the dead plants removed from the flower bed, and the driveway reasonably well swept.

Sometimes, though, the situation calls for more. If, for example, you're planning to put your house on the market. Obviously you want your home to be as attractive as possible to potential buyers. On the other hand, you don't want to put too much cash behind the effort. So what do you do?

This being National Curb Appeal Month, I asked RECON subscribers who are in the business of selling houses to share their best tips for sprucing up a home's front exterior quickly and inexpensively. All of the respondents agreed that a fresh coat of paint on the door and shutters, along with fresh plants and mulch in the flower beds, is the best way to make a strong first impression.

For the homeowner who wants to put just a little more effort and money into it, DIYNetwork.com​ also suggests:

  • replacing your old mailbox, making sure you follow city regulations;
  • putting up new house numbers if your old ones are faded;
  • planting a tree, keeping in mind how big it will get and whether it will eventually encroach on your home;
  • installing exterior lighting that fits the style of your home and makes your entryway safer; and
  • adding flower boxes to your front windows, especially if your house lacks color.
​Need more ideas? Looking for inspiration? Chances are you've seen HGTV's program, 'Curb Appeal.' It's been around for years. Their website has galleries and videos to point you in the right direction.
Just because it's TuesdayJust because it's TuesdayDavid S. JonesJones, D.


I​t has been my experience that Tuesday is a great day of the week.

Need to ask someone for a favor? Ask on Tuesday. As president of the local Lions Club, church board, and professional communications group, I have asked many people to chair committees or help with events. When I ask on Tuesday, the reply is overwhelmingly “yes."

Have an email to send? Do it on Tuesday. The Real Estate Center's twice-weekly e-newsletter RECON goes to 15,000 subscribers on Tuesdays and Fridays. It just so happens that visitors to our website peak on Tuesdays (see graphic), and I think RECON has a lot to do with that.


Tuesday is the most popular day of the week to work out, according to ClassPass, with the most popular gym time being 5:30 to 6:30 p.m.

Tuesday is the best day to buy cheap airline tickets online, according to digital expert Kim Komando. She touts Tuesday “because airlines often announce deals on Monday evenings. By Tuesday at noon, other airlines are scrambling to match those deals."

Monster.com says Tuesday is the best day to find a job. Not only is it the best day to look, it is the day most people are hired. It's the day most companies post jobs. Nearly 58 percent of jobs are posted Monday through Wednesday, with most of the action on Tuesday (18.5 percent of applications).

Writing in The Sydney Morning Herald, Caitlin Fitzsimmons explains why Tuesday is the most productive day of the week. For one thing, she says 90 percent of sick days in Australia are taken on Monday or Friday. She notes, “It's logical to infer a good proportion of . . . sick days are actually people chucking a sickie." Wednesday is “hump day," and Thursday is when we clear the decks for the weekend. A 2013 survey by Accountemps shows 39 percent of HR managers rank Tuesday tops in productivity.

If you want to hold a meeting, do it on Tuesday, according to Quartz Media. A study by YouCanBookMe in England found that 2:30 pm on Tuesday is the time most people are free.

For those of you who do cold calling and hate it, TheBalance.com offers hints to turn cold calls into sales. “Tuesdays have proven to be the best day for sales professionals to send emails, mail, and cold call." People are into their weekly routine, cranking out work, and aren't looking forward to the weekend yet.

Apparently, Tuesday is just about the best day for anything, except buying or selling a house. 

 The 33.19-carat Elizabeth Taylor Diamond sold in 2011 for $8.8 million. In 1968, it was known as the Krupp Diamond when Richard Burton bought it for $305,000. When asked why he gave it to Elizabeth Taylor, he said, “just because it's Tuesday." 

Finding the purrrr-fect home for you (and Fido, too!)Finding the purrrr-fect home for you (and Fido, too!)Bryan PopePope
​​​​​​​​​Collie lying in yard.

SunTrust Mortgage recently asked millennial homeowners​ what influenced their decision to buy a home. I imagine we can all relate to the top response: a desire for more living space (66 percent). The second-most-popular response—to build equity (36 percent) —showed their more financially pragmatic side.

Then there was the third-most-cited reason, which I found surprising but also delightful: better space/yard for a dog (33 percent).

Meanwhile, 42 percent of millennials who have never purchased a home said their dog—or the desire to have a dog—is a key factor in their wish to buy a home in the future.

Since many RECON subscribers are residential real estate agents, I thought I'd ask them to weigh in on this. Of the 95 who responded to our informal poll in Tuesday's edition, only 16.8 percent said millennial buyers’ chief concern was space/yard for a dog. Equity (25.3 percent), recent marriages (20 percent), and recent births (20 percent) were the top reasons.

Obviously pets are family to many people. Like any other member of the family, they can influence not only when a person decides to buy a home but what features the home absolutely must have.

Bryan-College Station Realtor Keta Jones said the lack of a fence (or even the presence of one simply in need of repair) has been a dealbreaker for some dog owners. She said others passed on homes that didn’t have a room with a view—for the pet.

“I’ve had clients not buy a house because there​ is not a low window for the dog to look out,” Jones said. “For some people, especially those with small dogs, low windows are very important.”

For some pet owners, the location of the window is just as important.

“One client ruled out a house because it didn’t have a window in the utility room,” Jones said, “The utility room was where their cat liked to stay, and the cat ‘preferred’ a window there.”

Jones said she once suggested that a client’s dog could look out a sliding glass door that opened onto the backyard, but the buyer said Fifi “wouldn’t like that.”

Among other reasons she said buyers have cited for not buying a specific home: no sidewalks to walk their dogs and no nearby, dog-friendly parks.

“If I know a client has a dog, I point out features that their pet would like when I show a house," Jones said.

For folks in the business of selling homes, that's a good rule of thumb, er, paw.
No fuel like an old fuelNo fuel like an old fuelLuis TorresTorres

​​​Texas turns on the crude oil spigot

Texas got a major economic boost on Dec. 18, 2015. That's the day Congress ended the 40-year-old U.S. export ban on crude oil. Overnight, the market for light sweet Texas crude went from domestic to worldwide.

The decision was a much-needed stimulus for the Texas fracking industry, especially in the Eagle Ford and Permian Basin. European countries were also pleased the ban was lifted because it reduced their dependence on Russian and African oil. Political and economic instability makes light crude supplies from countries such as Libya and Nigeria problematic. Even China is looking at U.S. crude oil to reduce its dependence on Middle Eastern oil.

U.S. crude oil exports soared from 392,000 barrels per day in December 2015 to one million in April. That's an increase of approximately 155 percent in less than two years (Figure 1) and is 11 percent of the nation's total output.

Canada was exempt from the ban. The U.S. had been exporting crude oil to our northern neighbor in limited amounts since the early 1990s and sporadically to other countries. In 2016, the top export destinations for U.S. crude oil were Canada (57.9 percent), the Netherlands (7.3 percent), Curacao (5.7 percent), China (4.3 percent), Italy (4.1 percent), and the United Kingdom (3.1 percent).

Figure showing U.S. exports of crude oil

Rising crude oil exports allow the U.S. to gain international market share at a time when the Organization of Petroleum Exporting Countries (OPEC) is reducing output in an attempt to shrink the global oil supply. If strong U.S. export growth continues, West Texas Intermediate (WTI) may replace Brent Crude as the global benchmark for sweet light high-grade crude oil.

​Texas crude oil exports gushed from approximately $319.3 million in December 2015 to $1,061.4 million in May (Figure 2). This was 65 percent of U.S. crude exports. In 2016, Texas oil traveled to Canada (28.3 percent), the Netherlands (15.4 percent), Curacao (10.7 percent), Italy (7.3 percent), and China and the United Kingdom (5.1 percent each). Year to date (May), however, China is the top export market for Texas crude oil.

Figure showing Texas exports of crude oil

Texas beefing up for ChineseTexas beefing up for ChineseWesley MillerMiller

Texas beef and China blog illustration

In June, China accepted its first shipment of American beef in 14 years amid advancing trade discussions. An isolated case of mad cow disease in 2003 prompted American beef bans across the globe, shrinking industry exports by 93 percent (see figure). Beef exports did not fully recover until 2010 and have bounced around $360 million since 2013.

U.S. beef producers have long lobbied for renewed access to the massive Chinese market. Rising incomes and dietary shifts pushed China's beef imports to $2.6 billion in 2016, making it the second largest beef importer (behind the U.S.). However, American beef faces stiff competition from Australia, where exports totaled $600 million to China in a 2016 China-Australia free trade deal.​​​

Total beef exports chart

In 2002 to 2003, China imported just $23 million of American beef, accounting for less than half of a percent of U.S. beef exports. China's role was even smaller in Texas, accounting for less than one-fifth of a percent of beef exports at $1 million. Unsurprisingly, China's American beef prohibition was unnoticeable, but bans in Japan and South Korea slashed Texas exports by $249 million in 2004.

Japan and South Korea slowly regained confidence in the American product, surpassing pre-crisis import levels from Texas in 2014 at $296 million combined. While other nations followed suit, the Chinese ban held fast despite growing domestic demand. American beef still found its way into the country through Hong Kong, but quantities were limited.

In 2016, Texas exported half its beef to Asia; renewed access to China opens another vast market in the region. Increased cargo quantities benefit Texas producers by stimulating economies of scale, thereby driving down average transportation costs—a vital component in transcontinental trade.​

Are you anti-social (media)? Probably not if you're in real estateAre you anti-social (media)? Probably not if you're in real estateBryan PopePope
2017-07-19T05:00:00ZCenter News
​​​Earlier this year, the National Association of Realtors (NAR) surveyed its members about their social media practices. The results are included in NAR's Real Estate in a Digital Age 2017 Report.

What did they learn?​
  • Seventy-four percent of female Realtors are active on social media compared with 66 percent of male Realtors.
  • Sales agents use it the most (72 percent), followed closely by broker associates (70 percent) and brokers (67 percent). Appraisers are a distant fourth at 41 percent.
  • Fifty-seven percent of Realtors are either “comfortable” or “extremely comfortable” using social media. Only 7 percent don’t use it at all.
  • NAR measured usage of eight social media platforms. Facebook is most used by Realtors (80 percent), followed by LinkedIn (71 percent), Google+ (32 percent), YouTube (30 percent), Twitter (28 percent), Pinterest (21 percent), real estate blogs (16 percent), and Instagram (14 percent).​​

Alright, so quite a few of you are using social media in your work, and Facebook and LinkedIn are your favorite platforms.

I have good news for you. The Real Estate Center is also on Facebook, LinkedIn, Twitter, Instagram, and YouTube, and we post information pertinent to your job daily, often multiple times a day.​​​

For example, already this week we've shared information about Longview home sales, insurance payouts to Panhandle wildfire victims, Texas foreign-bought land, and Dallas' national standing as a good place to buy office space.

Of course, we also like a dash of levity with our social media. ​​​By following us​, you can amaze and amuse your colleagues by knowing that it's National Pecan Pie Day (something every Texan ought to know), National Iced Tea Day, or National Day of the Cowboy. Last summer, we ran a social media campaign where we invited people to vote on their favorite small-town Texas name. It proved enormously popular. (Oh, and Happy, Texas, won.)

For more fun, participate in our latest giveaway. We've invited our social media followers and RECON subscribers to share their funniest DIY home-improvement disaster stories. Participants will be entered in a drawing for a $25 Home Depot gift card. Click here to tell us your story. Who knows? You could end up reading your story here in a week or two.


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