Contents About this Report... 2 April 2017 Border Summary... 3 Economic Activity... 7 Housing... 11

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2 Contents About this Report... 2 April 2017 Border Summary... 3 Economic Activity... 7 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 Total Import and Export Value 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 National Association of Home Builders Housing Opportunity Index Federal Housing Finance Agency Housing Price Index New Home Median Sales Price Existing Home Median Sales Price New Home Median Price Per Square Foot Existing Home Median Price Per Square Foot... 17

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 May 30, , Real Estate Center. All rights reserved. 2

4 April 2017 Border Summary Job gains pushed economic activity forward in and, but poor employment growth and depressed wages hindered and. Decreasing trade activity also weighed on the two struggling metros. Nonresidential construction activity continued to expand, but residential activity contracted. Single-family construction permits fell 6.9 percent, and housing sales dipped 3.1 percent. Economy Economic activity was steady along the Texas-Mexico border. The Business Cycle Index continued to climb, reaching positive annualized growth for the first time this year, and posted over 3.0 percent annualized growth for the fifth consecutive month. After sliding in the first quarter, the Index appeared stable, ticking down just a tenth of a percent. However, falling wages dragged the index below 1.2 percent annualized growth. Border construction values decreased 2.9 percent as declines in residential construction overpowered nonresidential activity. In, construction values dropped more than 22 percent in the residential and nonresidential components. Elsewhere on the border, investment in school buildings generated nonresidential construction value increases. So far this year, nonresidential construction values doubled in and quadrupled in. New schools, office buildings, and warehouses accounted for most of the new construction. also exhibited growth in nonresidential construction values, increasing 59.0 percent year-to-date. The border economies added 1,200 jobs 1 in April, pushing the annualized employment growth rate to 2.4 percent. Individually, s growth rate jumped to an annual high of 3.4 percent and accounted for half the border employment gains. maintained the highest growth rate at 3.6 percent. The rate slowed to 0.5 percent and observed a 0.7 percent contraction. s unemployment rate rose to 5.3 percent despite eight straight months of employment gains. The unemployment rate averaged 7.9 percent from 2015 to 2016 but has since jumped to 8.6 percent. The combination of increased unemployment and job growth indicate a labor force expansion. posted a similar unemployment increase, rising from 7.3 to 7.9 percent but without the strong job 1 Official numbers are reported instead of a 3-month moving-average for consistency. 3

5 employment gains. maintained the lowest border unemployment rate at 4.9 percent. In and, depressed wages continued to afflict the labor market; real private hourly earnings fell 6.9 percent and 8.4 percent year-over-year, respectively. El Paso wages stagnated, falling 1.0 percent back to its 2016 trend. Wages ticked up only half a percent in but rose 11 of the last 12 months. The peso per dollar exchange rate 1, an important determinant of border economic performance, fell 2.7 percent to pesos per dollar. 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. A weaker peso can benefit some sectors of the economy, particularly those that import large quantities of goods from Mexico. Therefore, currency fluctuations do not necessarily reduce the aggregate trade volume that crosses the border. The total value of trade activity decreased in April as the value of both imports and exports declined. Import values contracted in and for the third consecutive month. Housing Border housing sales fell 3.1 percent as demand softened. The housing market, which is larger than the other three combined, contracted for the second time this year. Sales fell 3.6 percent in and could fall further as economic conditions waver. housing sales declined 5.4 percent month-over-month and 8.9 percent year-overyear., the second largest border housing market, experienced a 2.5 percent decrease in sales. maintained a glut of new homes as the new home months of inventory (MOI) remained above 12 months. In contrast, the new home inventory fell to 3.3 months in, the third lowest in Texas behind Waco and Midland. In, the new home MOI continued to fall toward six months after settling at 8.3 months last year. The new home MOI increased for the third straight month to a record 7.4 months (the new home MOI series began in January 2011). s supply of new homes is likely to push even higher amid surging single-family residential construction permits. Permits bottomed out last summer but have recovered to 2012 levels and have increased 38.8 percent year-to-date. The number of construction 1 Official numbers are reported instead of a 3-month moving-average for consistency. 4

6 permits issued in fell for the first time this year, a concern given its depleted supply of new homes. Furthermore, permits continued to trend downward in and, falling 11.6 and 3.4 percent, respectively. Lagging residential construction pulled single-family private construction values down 11.2 percent on the border. Declines were widespread, but and observed the sharpest decreases at 17.4 and 16.2 percent, respectively. The existing home MOI remained saturated in and at 8.6 and 8.9 months, respectively, and balanced in at 5.5 months. For the 30 th straight month, the existing home MOI declined, falling to five months. Existing home demand was softest in, where the average number of days on market (DOM) for an existing home was 137 days. In, existing homes averaged 102 days on the market. In the past year, the existing home DOM averaged 90 days and showed little signs of deviation. While demand was strongest in, the DOM held at its 12-month average of 64 days. Demand for new homes continued to relax after reaching unprecedented strength in 2014 when the new home DOM fell to 21 days. In April, the DOM rose above 62 days, a 50.0 percent increase from last year. Conversely, s new home DOM fell to 81 days from its 133-day peak in 2015 a 39.2 percent decrease. New homes were on the market longest in at 128 days, followed by at 99 days. The median price and median price per square foot (ppsf) for both new and existing homes was highest in. However, slowing demand has pulled the median price for new homes down 12.9 percent this year to $185,381. Median prices for new ($164,688) and existing ($144,904) homes in have increased more than 8.1 percent year-todate. In median ppsf, ranks second on the border at $ and $82.45 for new and existing homes, respectively. Home prices dropped recently in, particularly in the new home market, where the median price fell to $158,529 a 14.4 percent decrease from August. The Federal Housing Finance Agency s House Price Index, which includes purchases and refinancing, provides a deeper look into the compositional changes, or lack thereof, in individual housing markets. The index lagged the rest of the border as home prices barely held above prerecession levels. Homes in have appreciated the most since 2007, rising over 12.4 percent. Price increases were similar in (10.7 percent) and (8.7 percent) but slowed recently. Lagging wages and rising home prices have become a concern across the country. and actually faced below-average affordability pressure, according to 5

7 the National Association of Home Builders Housing Opportunity Index (a measure of the share of homes affordable to those earning the median income). Falling wages strained affordability in, where less than 44.0 percent of homes were available to medianincome earners. The affordability index ticked up to 57.2 percent in but remained below the national average of 58.4 percent. 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 Jul-12 Jan-13 Jan-14 Jul-14 Jan-15 Jul-15 Jul-16 Note: Seasonally adjusted. For more information, see Texas Business Cycle Index. Source: Federal Reserve Bank of Dallas Total Construction Values ($) 40 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 May-11 Sep-11 May-12 Jan-13 May-13 Sep-13 Jan-14 Sep-14 Jan-15 May-15 Sep-15 May-16 Sep-16 Note: Real values are seasonally adjusted and detrended. Source: Dodge Analytics 7

9 Residential Construction Values (Index Jan 2008 = ) 45 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 May-11 Sep-11 May-12 Jan-13 May-13 Sep-13 Jan-14 Sep-14 Jan-15 May-15 Sep-15 May-16 Sep-16 Note: Real values are seasonally adjusted and detrended. Source: Dodge Analytics Apr-11 Jul-11 Oct-11 Apr-12 Jul-12 Nonresidential Construction Values (Index Jan 2011 = ) 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 Apr-17 Note: Real values are seasonally adjusted and detrended. Source: Dodge Analytics 8

10 Employment Growth Rate (Quarter-over-Quarter Annualized Percent Change) Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jul-11 Jul-12 Jan-13 Jan-14 Jul-14 Jan-15 Jul-15 Jul-16 Note: Seasonally adjusted, 3-month moving average. April 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 Jul-12 Jan-13 Jan-14 Jul-14 Jan-15 Jul-15 Jul-16 Note: Seasonally adjusted. April 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 = ) 80 Jan-07 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Jul-09 Dec-09 May-10 Oct-10 Mar-11 Aug-11 Jun-12 Nov-12 Apr-13 Sep-13 Feb-14 Jul-14 Dec-14 May-15 Oct-15 Mar-16 Aug-16 Notes: Inflation adjusted, seasonally adjusted and detrended. April 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 $12 Jan-07 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Jul-09 Real Peso per Dollar Exchange Rate ($) Dec-09 May- Oct-10 Mar-11 Aug-11 Jun-12 Nov-12 Apr-13 Sep-13 Feb-14 Jul-14 Dec-14 May- Oct-15 Mar-16 Aug-16 Note: Deflated using the Texas Trade Weighted Value of the Dollar. Source: Federal Reserve Bank of Dallas 10

12 Total Import and Export Value (Index Jan 2007 = ) Jan-07 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Jul-09 Dec-09 May-10 Oct-10 Mar-11 Aug-11 Jun-12 Nov-12 Apr-13 Sep-13 Feb-14 Jul-14 Dec-14 May-15 Oct-15 Mar-16 Aug-16 Note: The total dollar value of exports and imports were seasonally and detrended for each port of entry. Sources: Foreign Trade Division and U.S. Census Bureau Housing Housing Sales (Index Jan 2007 = ) Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jul-11 Jul-12 Jan-13 Jan-14 Jul-14 Jan-15 Jul-15 Jul-16 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 = ) 30 Jan-07 Sep-07 May-08 Jan-09 Sep-09 May-10 Sep-11 May-12 Jan-13 Sep-13 Jan-15 Sep-15 May-16 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 = ) Jun-11 Nov-11 Apr-12 Feb-13 Dec-13 Oct-14 Mar-15 Aug-15 Jun-16 Nov-16 Apr-17 Note: Inflation adjusted. Seasonally adjusted and detrended. Source: Dodge Analytics 12

14 New Home Months of Inventory (Months) Jun-11 Nov-11 Apr-12 Feb-13 Dec-13 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 Feb-13 Dec-13 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 Feb-13 Dec-13 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 Feb-13 Dec-13 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 80 National Association of Home Builders Housing Opportunity Index (Percent) 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 I Note: Seasonally adjusted. Source: National Association of Home Builders Federal Housing Finance Agency Housing Price Index (Index Jan 2007 = ) 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 I Note: Seasonally adjusted. Source: Federal Housing Finance Agency 15

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

18 110 New Home Median Price Per Square Foot ($) Jun-11 Nov-11 Apr-12 Feb-13 Dec-13 Oct-14 Mar-15 Aug-15 Jun-16 Nov-16 Apr-17 Note: Seasonally adjusted and detrended. For single-family homes. Source: Real Estate Center at Texas A&M University Existing Home Median Price Per Square Foot ($) Jun-11 Nov-11 Apr-12 Feb-13 Dec-13 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 17

19 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