Dr. James P. Gaines Chief Economist. recenter.tamu.edu

Transcription

1 Dr. James P. Gaines Chief Economist recenter.tamu.edu

2 2018 A Very Good Year Definite Slowdown Real GDP growth % ~2.5% Jobs expanded ~1.5% Unemployment rate ~4.0%+ Interest rates up/down during the year; Inflation approached 2.5% Tax Cuts added positive impacts Industrial Production high but less labor Income and spending growing Real Disposable Personal Income +2.9% thru 3Q18 Real PCE +2.6% thru 3Q18 Housing improving, not fully recovered; recent stalling U.S. became #1 oil producer and net exporter 2

3 Consumer Confidence Index Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Texas Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 U.S. Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Source: The Conference Board (1985=100; NSA); Haver Analytics 3

4 NFIB Small Business Optimism Index (Overall Index SA 1986 = 100) Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Source: National Federation of Independent Businesses; based on ten survey indicators

5 Source: Haver Analytics; FHLMC; St. Louis FED; Real Estate Center at Texas A&M University Fed Funds Rate, 10-Year Treasury, 30-Year FMR 30-Year FMR Fed Funds Rate 10-Year Treasury Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul

6 Source: Haver Analytics; FHLMC; St. Louis FED; Real Estate Center at Texas A&M University Fed Funds Rate, 10-Year Treasury, 30-Year FMR & Inflation 30-Year FMR Fed Funds 10-Year Treasury Inflation Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul

7 Texas Economy Oil Decline; Down Years 2017 Recovery A Good Year 2018: Better than Some Headwinds, but Not Bad 7

8 2018 a Very Good Year Economically For Texas Rebound from Harvey going strong but not over State GDP +6% (2Q18) #1 in U.S. [estimate ~4.5% 2018 total] Personal Income +5.3% vs. 4.5% nationally Oil Prices >$70 until 4Q dropped then rebounded Jobs increased 276, % Population increased 379,128 to 28,701, ,951 natural increase (50.3%) 104,976 foreign immigration (27.7%) 82,569 domestic immigration (22%) 8

9 Texas Economic Outlook: 2019 Positive but Slower Growth Than 2018 U.S. Economy stays relatively strong Employment: ~1.5% - 2.0% from 2.3% in 2018 (revised) GDP: 4% 2019 from ~5% 2018 Energy sector neutral; oil prices $40-$60/bl. Population expansion continues but at slower pace Exports doing well and contributing to economy trade agreements and value of dollar add uncertainty Retail Sales steady but not significantly higher 9

10 Texas Leading Economic Index T e c h W r e c k Great Recession Oil Bust A composite of 8 leading indicators: 1) value of the dollar, 2) U.S. leading economic index, 3) real oil price, 4) well permits, 5) initial claims for unemployment insurance, 6) Texas stock index, 7) help-wanted index, and 8) average weekly hours worked in manufacturing. Source: Federal Reserve Bank of Dallas, 1987=100

11 Texas Growth Year Jobs, NSA (Dec-Dec) Population (July-July) , , , , , , , , , , , , , , , , , ,128 Sources: US Census Bureau; Texas Workforce Commission; Real Estate Center at Texas A&M University ,881,963 people +2,379,200 jobs 11

12 Houston Economic Outlook

13 Weekly Active Texas Rig Count & Price of WTI 1, Rig Count (left) 6/27/2014, $ WTI $/bl. (right) Rig Count up 324, +187% since May /21/2014, 906 2/12/2016, $ /20/2016, 173 1/7/2000 4/28/2000 8/18/ /8/2000 3/30/2001 7/20/ /9/2001 3/1/2002 6/21/ /11/2002 1/31/2003 5/23/2003 9/12/ /31/2003 4/23/2004 8/13/ /3/2004 3/24/2005 7/15/ /4/2005 2/24/2006 6/16/ /6/2006 1/26/2007 5/18/2007 9/7/ /28/2007 4/18/2008 8/8/ /26/2008 3/20/2009 7/10/ /30/2009 2/19/2010 6/11/ /1/2010 1/21/2011 5/13/2011 9/2/ /22/2011 4/13/2012 8/3/ /21/2012 3/15/2013 7/3/ /25/2013 2/14/2014 6/6/2014 9/26/2014 1/16/2015 5/8/2015 8/28/ /18/2015 4/8/2016 7/29/ /18/2016 3/10/2017 6/30/ /20/2017 2/9/2018 6/1/2018 9/21/2018 1/11/2019 5/3/2019 $180 $170 $160 $150 $140 $130 $120 $110 $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 Source: Baker Hughes; EIA; RE Center at Texas A&M University 13

14 Houston Oil Jobs in the Fracking Era Houston is technological and engineering heart of oil industry Industry consolidation has favored Houston for decades Rigs are fewer, but much bigger and more intensively used and productive Need for Houston-based engineering, oil services, machinery and fabricated metals does not fall nearly as fast as number of rigs.

15 Texas Major MSAs Employment Growth 2017, 2018 & 2019 Percent Growth in Annual Employment Austin Dallas Fort Worth Houston San Antonio Texas Sources: TWC; Real Estate Center at Texas A&M University 15

16 Houston Economic Summary Upstream energy relatively stable; expect mostly neutral impacts; Oil prices $40 - $60/bl. Around $50B in downstream construction finished or near completion, some new projects being added Expect good employment growth but slower rate (70,000 90,000 jobs, 2% growth) in 2019; further diversity Healthcare, Construction, Admin. Support, Professional Services, Manufacturing, Restaurants, Retail & Government Trade at Port of Houston remains robust, key upside for future as well (~17% of Houston GDP); trade agreements & dollar value create uncertainty U.S. and Global economies fuel Houston s growth, but both are slowing

17 Texas Demographics 17

18 Estimated Population Change, Texas Counties, 2010 to , ,000 1,001-20,000 20, , , ,521 El Paso Hudspeth Dallam Sherman OchiltreeLipscomb Hansford Hartley Moore RobertsHemphill Hutchinson Oldham PotterCarsonGrayWheeler Deaf SmithRandall DonleyCollingsworth Armstrong ParmerCastro Briscoe HallChildress Swisher Hardeman BaileyLamb Hale FloydMotleyCottle Wilbarger Foard Wichita Clay Grayson Lamar King Knox BaylorArcher Cooke Fannin Red River CochranHockley Crosby Montague Bowie Lubbock Dickens DeltaFranklin Kent Jack Titus YoakumTerry Lynn Garza Haskell Young Wise Denton Collin HuntHopkins MorrisCass Stonewall Throckmorton RockwallRainsWood Marion Gaines ScurryFisher Jones Parker Dallas Upshur Borden Stephens Dawson Tarrant Harrison Shackelford Palo Pinto KaufmanVan Zandt Hood Andrews Johnson SmithGregg Martin MitchellNolan Taylor Eastland Ellis ErathSomervell Henderson Rusk Panola Howard Callahan Hill Navarro LovingWinklerEctorMidland Coke Comanche Bosque Shelby Sterling AndersonCherokee Glasscock RunnelsColemanBrown Hamilton Freestone Nacogdoches Culberson Ward Crane Mills McLennanLimestone San Augustine Sabine Reeves UptonReagan Tom Green Coryell Irion Concho Falls Leon Houston Angelina San Saba Lampasas McCulloch Trinity Bell RobertsonMadison Schleicher Polk JasperNewton Jeff Davis Pecos Menard Milam Crockett Burnet Walker Mason Tyler Llano Brazos Williamson Grimes San Jacinto Sutton Kimble Burleson Hardin Gillespie Travis Montgomery Lee Terrell Blanco Liberty Orange Presidio Edwards Kerr Hays Bastrop WashingtonWaller Kendall Brewster Val Verde Fayette Austin Harris Jefferson Real Comal Caldwell Bandera Chambers Guadalupe Colorado Fort Bend Bexar Gonzales Kinney Uvalde Medina Lavaca Galveston Wharton Wilson Brazoria DeWitt Jackson Zavala Frio AtascosaKarnes Victoria Matagorda Maverick Goliad McMullen Dimmit Bee Calhoun La Salle Live Oak Refugio Webb San PatricioAransas Jim Wells Duval Nueces Kleberg Jim Hogg Zapata Brooks Kenedy 91 counties lost population over the 7 year period. 87% E of I-35 67% in Urban Triangle Starr Willacy Hidalgo Cameron Source: U.S. Census Bureau, 2017 Vintage Population Estimates; Texas State Demographer s Office 18

19 Texas Population ,000,000 50,000,000 40,000,000 From 1970 to 2010 (40 years), Texas added 13.9 million people From 2010 to 2050 (40 years), Texas will probably add ~17-30 million people Projection 54,369,297 47,342,417 30,000,000 25,145,561 20,000,000 10,000,000 Revised 2018 Projection ( Rate) 11,196, Sources: U.S. Census Bureau; Texas State Demographer s Office 2018 Projection & Scenario; Real Estate Center at Texas A&M University 19

20 Projected Population Change, Texas Counties, , ,000 2,001-10,000 10, ,000 90%+ in the Urban Triangle 100,001-1,000,000 1,000,001-3,480,000 Source: Texas State Data Center 2012 Population Projections Migration Scenario 20

21 Houston MSA Population Brazoria, Chambers, Fort Bend, Galveston, Liberty & Montgomery Counties 16,000,000 14,000,000 12,000,000 10,000, ,300,851, 140% 2018 Projection +7,235,577, 122% 9,278,789 11,519,566 14,221,267 13,155,993 8,000,000 6,000,000 5,920,416 7,413,214 4,000,000 3,136,206 2,000, Sources: U.S. Census Bureau; Texas State Demographer s Office 2018 Projection & Scenario; Real Estate Center at Texas A&M University 21

22 Harris County Population 9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 1,741,913 2,000,000 1,000, ,350,546, +135% ,808,535, +93% 5,922,906 4,978,446 4,092,459 6,892,477 7,900, Sources: U.S. Census Bureau; Texas State Demographer s Office 2018 Projection & Scenario; Real Estate Center at Texas A&M University 22

23 Texas Housing Market 23

24 2018 Percent Changes in Key Housing Measures Sales Average Price Median Price Months Inventory Median Price/sf Texas 1.7% 3.7% 4.5% 9.8% 5.0% Austin 1.4% 4.2% 3.9% 9.7% 3.9% DFW -2.4% 4.1% 3.9% 19.7% 5.7% Houston 3.4% 2.7% 3.1% 13.5% 4.2% San Antonio 2.9% 4.2% 5.2% 8.0% 5.5% Source: TR Data Relevance Program; Real Estate Center at Texas A&M University 24

25 Texas Median HH Income & Median Home Price Indexed to Median Price = 2.65 x Median HH Income 2017 Median Price = 3.76 x Median HH Income Median Home Price +226% Nominal HH Income +129% 2017 Adjusted HH Income +20% Sources: U.S. Census Bureau; Haver Analytics; Real Estate Center at Texas A&M University

26 2019 Home Market Slowdown Factors that may create a drag on home-buying demand Limited inventory availability Higher prices - affordability Increasing interest rates Concerns about general economy fear of recession or jobs Stock market volatility Negative press coming off record year(s) 26

27 February 2019 Residential Sales Slowed Down; Price/Sq. Ft. Still Up Price +3.7% YTD Sales -1.2% YTD Source: TR Data Relevance Program; Real Estate Center at Texas A&M University 27

28 Houston Housing Market 28

29 Annual Houston Home Sales, Average & Median Prices 100,000 95,000 90,000 85,000 80,000 75,000 Sales Avg Price Md Price 2018 Sales +3.3%; Md. Price +3.1% 2019p Sales +1.1%; Prices +4.5% 78,326 75,110 87,122 88,080 84,331 81,816 82,144 79,661 80,161 $340,000 $320,000 $300,000 $280,000 $260,000 $240,000 70,000 65,000 64,764 70,397 63,015 67,760 $220,000 $200,000 60,000 58,724 58,116 58,159 $180,000 55,000 50,000 50,716 52,067 54,685 54,922 $160,000 $140,000 45,000 $120,000 40,000 $100, p Source: HAR, Texas Realtors Data Relevance Project; Real Estate Center at Texas A&M University 29

30 Harris Co Sales and Months Inventory by Price 2018 Sales 15,000 10,000 5,000 0 Current Mos. Inventory % 1,168 $0 - $69, , % $70,000 - $99, , % $100,000 - $149, , % $150,000 - $199, , % $200,000 - $249, , % $250,000 - $299, , % $300,000 - $399, , % $400,000 - $499, About 64% of sales in $100k to $300k range 2, % 2.0% 1, % 1,421 $500,000 - $749,999 $750,000 - $999,999 $1,000, Source: HAR, TR Data Relevance Program; Real Estate Center at Texas A&M University30

31 February 2019 Harris Co. Residential Sales Slowed Down & Price/Sq. Ft. Still Up Sales & Prices by Local Market Areas Sales -6.2% YTD Price +3.4% YTD Source: HAR, TR Data Relevance Program; Real Estate Center at Texas A&M University31

32 February 2019 Harris Co. Residential Sales Slowed Down & Price/Sq. Ft. Still Up Sales & Prices by Zip Codes Sales -6.2% YTD Price +3.4% YTD Source: HAR, TR Data Relevance Program; Real Estate Center at Texas A&M University32

33 February 2019 NW Harris Co. Residential Sales Sales by Local Market Areas Source: HAR, TR Data Relevance Program; Real Estate Center at Texas A&M University33

34 February 2019 NW Harris Co. Residential Price/Sq. Ft. Continues Firm Prices by Local Market Areas Source: HAR, TR Data Relevance Program; Real Estate Center at Texas A&M University34

35 2019 Single-Family Housing Sales Projected to Slowdown Single Family Forecast 2018 (%) 2019 (%) 2020(%) Texas (%) Housing Permits Sales Price per square foot Houston Housing Permits Sales Price per square foot Note: Estimated with October/December 2018 data Housing Permits are forecasted. Slowing economic and employment growth causing housing demand to soften. Price pressures projected to ease as housing demand weakens. Homebuilders stretch to increase production in entry and first move-up markets. Source: Real Estate Center at Texas A&M University

36 Houston SF Building Permits Lead the Nation! 60,000 55,000 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5, , e +3.5% 2019p +1% 25,763 30,563 30,303 17,820 10,963 9,894 8,886 7,803 7,514 8,093 15,159 15,661 15,762 15,873 13,535 20,854 19,463 25,414 25,617 34,685 30,490 28,169 42,040 51,202 45,092 55,159 42,217 28,188 28,624 22,328 22,36922,887 40,25940,662 38,319 36,78636,348 34,543 35, e 2019p Source: US Census Bureau; Real Estate Center at Texas A&M University

37 Houston MF Building Permits 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5, ,310 21,543 42,355 32,495 12, % % % 2018e +150% 2019p +2% 4,067 3,667 3,341 3, ,041 2,243 2, ,690 4,783 4,499 20,189 11,265 10,150 7,631 6, average 12,639 11,382 16,586 15,733 14,165 10,602 10,468 20,312 4,709 4,858 8,281 14,525 16,649 25,044 19,798 9,054 5,722 14,296 14, e 2019p Source: US Census Bureau; Real Estate Center at Texas A&M University

38 2019 Outlook for Commercial Real Estate is Positive Projected Overall Vacancy Rates and Asking Rents Vacancy Rates (%) Asking Rents (y-o-y %) Property Type Natural Vacancy Rate Office Retail Warehouse Note: Annual numbers represent the four-quarter average of the seasonally adjusted data. Rent growth is nominally estimated from the previous year s average. Sources: Co-Star; Real Estate Center at Texas A&M University

39 2019: Cautious Optimism Economy is still doing fine; 2019 Positive Growth at Slower Rate Uncertain interest rates Selective, limited housing inventory available to sell Builders/Developers Rethinking Designs & Processes Changing loan underwriting requirements and standards Pricing difficult both for listings and for sales Office market seems to have reached bottom, while retail and warehouse will continue to register strong growth 39

40 Dr. James P. Gaines Chief Economist recenter.tamu.edu