Contents About this Report May 2017 Border Summary Housing

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2 Contents About this Report... 2 May 2017 Border Summary... 3 Business Cycle Index... 7 Total Construction Values... 7 Residential Construction Values... 8 Nonresidential Construction Values... 8 Employment Growth Rate... 9 Unemployment Rate... 9 Total Private Employee Hourly Earnings Real Peso per Dollar Exchange Rate Retail Sales Housing Housing Sales Single-Family Housing Construction Permits Total New Private Single-Family Construction Value New Home Months of Inventory Existing Home Months of Inventory New Home Days on Market Existing Home Days on Market New Home Median Sales Price Existing Home Median Sales Price New Home Median Price Per Square Foot Existing Home Median Price Per Square Foot... 16

3 About this Report Real Estate Center economists continuously monitor many facets of the global, national, and Texas economies. Texas Border Economy is a summary of important economic indicators that help discern trends in the housing markets along the Texas-Mexico border. All data are seasonally adjusted and averaged over three months, while percentage changes are calculated month-over-month, unless stated otherwise. This monthly publication provides data and insights on the Texas border markets. We hope you find them useful. Your feedback is always appreciated. Send comments and suggestions to info@recenter.tamu.edu. Dr. James Gaines, Dr. Luis Torres, Wesley Miller, and Bailey Cuadra Data current as of June 30, , Real Estate Center. All rights reserved. 2

4 May 2017 Border Summary Job growth continued to push economic activity forward in and, despite falling wages. In, wages and jobs expanded, while economic activity in slowed. Additionally, the unemployment rate fell along the border for the first time in three months. Single-family private construction values increased throughout May, rebounding from last month s fall. And as the summer months draw near, the demand for homes along the Texas-Mexico border began to heat up as sales increased 5.1 percent. Economy The Business Cycle Index ticked positive for the first time since April 2015, reaching 0.2 annualized growth. Although it was a positive month for job growth, wages in continued to fall, making it unclear whether this trend will continue. and El Paso sustained their positive annualized growth at 3.3 percent and 1.4 percent, respectively. In contrast, continued to post negative annualized growth at 1.1 percent. Total border construction values fell 7.2 percent on the month, with losses coming in both the residential and nonresidential sectors. In, the total value of construction increased 2.6 percent year-to-date, despite monthly losses in residential and nonresidential construction values. Increased investment for construction dedicated to office buildings, schools, and multifamily homes allowed to post the largest increase in total construction values on the month. Residential construction values in climbed 6.8 percent after falling for three consecutive months. In, declines in nonresidential construction values overpowered gains in residential construction. The border economies added an additional 1,200 jobs 1 in May as the annualized employment growth rate increased to 2.0 percent. Individually, showed improvement from last month, reaching 1.2 percent annualized growth. had the strongest annualized growth of 2.4 percent and accounted for half of the employment gains across the border economies. Employment growth in slowed to 2.3 percent after five consecutive months of improvement, while s annualized growth rate climbed from 0.3 percent last month to 0.9 percent in May. The unemployment rate showed signs of improving along the Texas border. maintained the lowest unemployment rate at 4.8 percent, which is below its 2016 average of 4.9 percent. continued to hover around its 2017 average of 5.2 percent, despite 1 Official numbers are reported instead of a three-month moving-average for consistency. 3

5 exhibiting a two-year high last month. While it is still only a modest improvement, and had the largest decreases in unemployment among the border economies and fell to 8.4 and 7.8 percent, respectively. In and, depressed wages continued to fall further as real private hourly earnings fell 7.7 percent and 9.5 percent year-over-year, respectively. Conversely, and wages continued to show improvement, climbing 4.7 percent and 2.0 percent year-to-date. The peso per dollar exchange rate 1, an important determinant of border economic performance, remained steady at $ Peso appreciation benefits border economies by stimulating consumption by Mexican nationals, particularly in the retail sector. The and economies rely heavily on cross-border business transactions and, therefore, are disproportionately affected by currency fluctuations. Recently reported data on retail sales for the closing quarter of 2016 showed,, and posting significant losses. In, retail sales fell sharpest at 15.5 percent annualized loss, followed by and with 11.0 percent and 10.1 percent losses, respectively. The peso was devalued 6.4 percent from quarter three to quarter four during 2016, so it was expected that the retail sector would be heavily affected. experienced negative annualized growth of 2.1 percent, wiping away the gains during third quarter Housing Border housing sales increased 5.1 percent in May as demand strengthened along the border. Housing sales in and recovered all of last month s losses, increasing 4.4 percent and 3.5 percent, respectively. The housing market, which is larger than the other three combined, had seen steady improvement throughout the year, increasing 1.0 percent year-to-date and up 6.7 percent since May 2016., the second largest housing market of the border cities, continued its positive trend, climbing 12.7 percent year-to-date and reaching a series high in housing sales (housing sales series begins in January 1990). After a poor start to the year, home sales stabilized around its 2016 trend. continued a decrease in the supply of new homes listed as new home months of inventory (MOI) fell for the sixth consecutive month. s new home MOI has now fallen 22.9 percent year-to-date and currently sits at 3.2 months. In, the supply of new homes listed expanded 2.7 percent in May to seven months, suggesting the housing 1 Official numbers are reported instead of a three-month moving-average for consistency. 4

6 market for new homes could be stabilizing despite exhibiting negative growth on the year. The new home MOI for is currently 7.3 months, which is above its 2016 average of 6.8 months. The new home MOI increased 7.5 percent year over year and is currently 11.5 months. While s new home inventory is much larger than other border housing markets, it remains consistent with its six-year average of 11.4 months. In, single-family residential housing construction permits declined for the fourth consecutive month, falling 11.3 percent year-to-date. The decline in permits indicates that the supply of new homes in may begin to decrease. The number of construction permits issued in recovered from last month s losses, increasing 13.5 percent month-over-month. Construction permits in remain steady on the year falling only 0.6 percent year-to-date. In, the number of construction permits issued have begun to slow, falling for the second consecutive month. However, year-to-date growth for construction permits in still remains high at 23.7 percent. Single-family private construction values showed positive growth along the border, with increasing 5.9 percent and increasing 3.6 percent since last month. While and still recorded monthly gains, they were much smaller at 0.2 percent and 0.6 percent, respectively. s existing supply of homes for sale has continued its rapid decline, falling to 4.9 months. While the existing home MOI remains saturated in and at 8.5 months and 8.8 months, respectively. continues to hover around its 2016 average at 5.6 months. Existing home demand strengthened in, where the average number of days on market (DOM) for an existing home fell to a 17-month low of 109 days. Existing home demand in remained steady at 105 days, hovering around its average days on market for s existing home DOM remained unchanged since last month at 85 days, while existing home days on market was lowest in at 58 days. Demand for new homes remains consistently strong for, at 81 days on market. has shown considerable improvement this year from its 2015 and 2016 average of 114 days and 97 days, respectively. In, new home DOM has now increased 26.3 percent on the year to reach 110 days on market. The average number of days on market for new homes in remained high at 128 days. Demand for new homes in continued to diminish, climbing to 64 days. In, the median price and median price per square foot (ppsf) for new homes fell despite increases in the existing home market. The median price and median ppsf for both new and existing homes was again highest in. However, slowing demand has 5

7 pulled the median price for new homes down 11.9 percent this year to $187,508. In El Paso, the median price for an existing home fell below $130,000 for the first time in ten months, while the median price and median ppsf for a new home was $172,158 and $105.18, respectively. The median price of a new home in has fallen 13.1 percent since May of last year to reach $160,302. In s existing home market, the median price and median ppsf is 136,467 and $76.65, respectively. 6

8 Economic Activity 20 Business Cycle Index (Quarter -over- Quarter Percent Change) Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jul-11 Jan-12 Jul-12 Jan-13 Jan-14 Jul-14 Jan-15 Jul-15 Jul-16 Jan-17 Note: Seasonally adjusted. For more information, see Texas Business Cycle Index. Source: Federal Reserve Bank of Dallas Total Construction Values ($) Note: Real values are seasonally adjusted and detrended. Source: Dodge Analytics 7

9 Residential Construction Values (Index Jan 2008 = 100) Jan-08 Jun-08 Nov-08 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12 Aug-12 Jan-13 Jun-13 Nov-13 Apr-14 Sep-14 Feb-15 Jul-15 Dec-15 May-16 Oct-16 Mar-17 Note: Real values are seasonally adjusted and detrended. Source: Dodge Analytics Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Nonresidential Construction Values (Index Jan 2011 = 100) Oct-12 Jan-13 Apr-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Note: Real values are seasonally adjusted and detrended. Source: Dodge Analytics 8

10 8 Employment Growth Rate (Quarter-over-Quarter Annualized Percent Change) Border Variable -10 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jul-11 Jan-12 Jul-12 Jan-13 Jan-14 Jul-14 Jan-15 Jul-15 Jul-16 Jan-17 Note: Seasonally adjusted, 3-month moving average. May 2017 is preliminary. For more information, see Employment Growth Rate. Source: Bureau of Labor Statistics 13 Unemployment Rate (Percent) Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jul-11 Jan-12 Jul-12 Jan-13 Jan-14 Jul-14 Jan-15 Jul-15 Jul-16 Jan-17 Note: Seasonally adjusted. May 2017 is preliminary. For more information, see Unemployment Rate. Sources: Bureau of Labor Statistics and Real Estate Center at Texas A&M University 9

11 Total Private Employee Hourly Earnings (Index Jan 2007 = 100) Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jul-11 Jan-12 Jul-12 Jan-13 Jan-14 Jul-14 Jan-15 Jul-15 Jul-16 Jan-17 Notes: Inflation adjusted, seasonally adjusted and detrended. May 2017 is preliminary. For more information, see Total Private Employee Hourly Earnings. Source: Bureau of Labor Statistics $22 $21 $20 $19 $18 $17 $16 $15 $14 $13 $12 Jan-07 Jun-07 Nov-07 Apr-08 Real Peso per Dollar Exchange Rate ($) Sep-08 Feb-09 Jul-09 Dec-09 May-10 Oct-10 Mar-11 Aug-11 Jan-12 Jun-12 Nov-12 Apr-13 Sep-13 Feb-14 Jul-14 Dec-14 May-15 Oct-15 Mar-16 Aug-16 Jan-17 Note: Deflated using the Texas Trade Weighted Value of the Dollar. Source: Federal Reserve Bank of Dallas 10

12 15 Retail Sales (Year-over-Year Percent Change) I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV Note: Seasonally adjusted and inflation adjusted. For more information see Texas Retail Sector. Source: Retail Sales from Texas Comptroller of Public Accounts estimated by Dallas Federal Reserve Bank Housing Housing Sales (Index Jan 2007 = 100) Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jul-11 Jan-12 Jul-12 Jan-13 Jan-14 Jul-14 Jan-15 Jul-15 Jul-16 Jan-17 Note: Seasonally adjusted sales reported by MLS and detrended. Source: Real Estate Center at Texas A&M University 11

13 Single-Family Housing Construction Permits (Index Jan 2007 = 100) 30 Jan-07 Sep-07 May-08 Jan-09 Sep-09 May-10 Sep-11 May-12 Jan-13 Sep-13 May-14 Jan-15 Sep-15 May-16 Jan-17 Note: Seasonally adjusted and detrended. Fort Worth is missing data for Somervell County. Sources: U.S. Census Bureau and Real Estate Center at Texas A&M University Total New Private Single-Family Construction Value (Index Jan 2007 = 100) Jun-11 Nov-11 Apr-12 Sep-12 Feb-13 Dec-13 May-14 Oct-14 Mar-15 Aug-15 Jun-16 Nov-16 Apr-17 Note: Inflation adjusted. Seasonally adjusted and detrended. Source: Dodge Analytics 12

14 16.0 New Home Months of Inventory (Months) Jun-11 Nov-11 Apr-12 Sep-12 Feb-13 Dec-13 May-14 Oct-14 Mar-15 Aug-15 Jun-16 Nov-16 Apr-17 Note: Seasonally adjusted and detrended. Source: Real Estate Center at Texas A&M University Existing Home Months of Inventory (Months) Jun-11 Nov-11 Apr-12 Sep-12 Feb-13 Dec-13 May-14 Oct-14 Mar-15 Aug-15 Jun-16 Nov-16 Apr-17 Note: Seasonally adjusted and detrended. Source: Real Estate Center at Texas A&M University 13

15 New Home Days on Market (Days) Jun-11 Nov-11 Apr-12 Sep-12 Feb-13 Dec-13 May-14 Oct-14 Mar-15 Aug-15 Jun-16 Nov-16 Apr-17 Note: Seasonally adjusted and detrended. For single-family homes. Source: Real Estate Center at Texas A&M University Existing Home Days on Market (Days) Jun-11 Nov-11 Apr-12 Sep-12 Feb-13 Dec-13 May-14 Oct-14 Mar-15 Aug-15 Jun-16 Nov-16 Apr-17 Note: Seasonally adjusted and detrended. For single-family homes. Source: Real Estate Center at Texas A&M University 14

16 200,000 New Home Median Sales Price ($) 190, , , , , , , , ,000 Jul-11 Jan-12 Jul-12 Jan-13 Jan-14 Jul-14 Jan-15 Jul-15 Jul-16 Jan-17 Note: Seasonally adjusted and detrended. For single-family homes. Source: Real Estate Center at Texas A&M University 180, , ,000 Existing Home Median Sales Price ($) 150, , , , , ,000 90,000 80,000 Jun-11 Nov-11 Apr-12 Sep-12 Feb-13 Dec-13 May-14 Oct-14 Mar-15 Aug-15 Jun-16 Nov-16 Apr-17 Note: Seasonally adjusted and detrended. For single-family homes. Source: Real Estate Center at Texas A&M University 15

17 110 New Home Median Price Per Square Foot ($) Jun-11 Nov-11 Apr-12 Sep-12 Feb-13 Dec-13 May-14 Oct-14 Mar-15 Aug-15 Jun-16 Nov-16 Apr-17 Note: Seasonally adjusted and detrended. For single-family homes. Source: Real Estate Center at Texas A&M University Existing Home Median Price Per Square Foot ($) Jun-11 Nov-11 Apr-12 Sep-12 Feb-13 Dec-13 May-14 Oct-14 Mar-15 Aug-15 Jun-16 Nov-16 Apr-17 Note: Seasonally adjusted and detrended. For single-family homes. Source: Real Estate Center at Texas A&M University 16

18 MAYS BUSINESS SCHOOL Texas A&M University 2115 TAMU College Station, TX DIRECTOR GARY W. MALER ADVISORY COMMITTEE DOUG ROBERTS, CHAIRMAN Austin MARIO A. ARRIAGA Conroe RUSSELL CAIN Port Lavaca ALVIN COLLINS Andrews JACQUELYN K. HAWKINS Austin DOUG JENNINGS, VICE CHAIRMAN Fort Worth BESA MARTIN Boerne TED NELSON Houston C. CLARK WELDER San Antonio BILL JONES, EX-OFFICIO Temple i