Contents About this Report July 2017 Border Summary Housing

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2 Contents About this Report... 2 July 2017 Border Summary... 3 Business Cycle Index... 6 Total Construction Values... 6 Residential Construction Values... 7 Nonresidential Construction Values... 7 Employment Growth Rate... 8 Mexico Maquiladora and Manufacturing Employment... 8 Unemployment Rate... 9 Total Private Employee Hourly Earnings... 9 Real Peso per Dollar Exchange Rate Total Import and Export Value Housing 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 Housing Sales 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 September 7, , Real Estate Center. All rights reserved. 2

4 July 2017 Border Summary A tightening labor market led to robust economic activity along the Texas-Mexico border. Peso appreciation and the healthy Mexican economy stimulated cross-border trade activity. The border economies added 2,900 jobs, primarily in and. Border housing demand continued to shift from the new home to the resale market, where inventories remained considerably lower. Economy The Business Cycle Index ticked up 1.7 percent annualized following an eightmonth decline. Strong employment growth and increased earnings contributed to s recent economic expansion. The index reached 5.0 percent annualized growth as unemployment fell to a record-low 4.0 percent. Second-quarter declines in unemployment also pushed the and indices up 2.8 percent and 3.7 percent, respectively. Total border construction values fell 0.1 percent with a decline in nonresidential construction activity. Nonresidential construction values in peaked during November 2016 following United Independent School District s construction of a new ninth-grade campus. Despite the slowdown, investments in stores and restaurants advanced in,, and. Total border residential construction increased 2.7 percent despite slowing in and. Border MSAs added 2,900 jobs 1 as employment growth remained steady at 1.9 percent annualized. Annualized employment growth in trended upward at 1.9 percent, while gains in the service-providing industry supported growth in (1.0 percent). Increased manufacturing and maquiladora activity in Ciudad Juárez stimulated s service sector. employment growth recovered from June s dip, climbing to 0.9 percent annualized, while maintained the strongest annualized employment growth rate at 3.5 percent. The unemployment rate 1 dropped to 4.3 percent, settling at the statewide and national average. Unemployment fell to 4.0 percent and 6.9 percent in and, respectively. experienced the largest decrease in unemployment, falling from 7.9 percent in June to 7.3 percent. The tightening labor market in drove real private hourly earnings up for the eighth-consecutive month, rising 7.0 percent year over year. In, earnings climbed 1 Monthly numbers are reported instead of a 3-month moving-average for consistency. 3

5 1.4 percent year over year, remaining $0.10 above the 2016 average. Wage growth in and remained dismal, falling 5.7 percent and 9.9 percent year over year, respectively. Distributional shifts from goods-producing to service-providing jobs in and contributed to the decreased wage growth. The peso per dollar exchange rate 2, an important determinant of border economic performance, appreciated 1.8 percent to $17.81, reaching its lowest level since April The peso devalued during the closing months of 2016 amid political concerns and rising U.S. interest rates. However, the value of the peso fully recovered, appreciating 16.8 percent since January. The total value of border trade activity increased 1.8 percent month over month and 9.0 percent year over year. Export activity outpaced imports by over half a percent amid increased Mexican demand. Housing Total border housing sales increased 1.5 percent, reaching 7.0 percent YTD growth. Home sales in struggled, falling 4.4 percent, as new home demand waned. Conversely, sales in,, and rose 3.3 percent, 0.7 percent, and 1.7 percent, respectively. Total border single-family residential housing construction permits declined 1.5 percent but maintained positive year-to-date (YTD) growth. The number of permits issued in and fell 11.5 percent and 2.9 percent year over year, respectively. The large drop in permits signaled builders reactions to new-home surpluses. Construction permits also declined in and, falling 4.1 percent and 0.7 percent, respectively. Total border single-family private construction values increased on a monthly basis in July. Construction values in and showed positive YTD growth but trended downward in and. New home months of inventory (MOI) expanded for each border economy with (3.3 months) posting the largest monthly increase at 10.3 percent. The supply of new homes listed in (8.4 months) showed positive YTD growth for the first time this year, climbing above its 2016 average of 8.2 months. In, the supply of new homes listed increased 7.9 percent to 12.8 months. However, the MOI for homes under $200,000 was at 6.5 months, suggesting a more balanced market. The new home MOI in ticked up to 7.4 months as the supply of new homes listed between $200,000 and $400,000 expanded. 2 Official numbers are reported instead of a 3-month moving-average for consistency. 4

6 The existing home MOI in (4.8 months) continued to slide, falling 13.4 percent YTD. Similarly, the supply of resale homes listed in (8.0 months) fell 2.8 percent YTD. In contrast, the resale MOI in (8.7 months) and (5.6 months) increased 1.7 percent and 5.6 percent YTD, respectively, and remained the only border metros to have positive YTD growth. Demand for existing homes remained steady in the border metros as the average number of days on market (DOM) decreased in (88 days), (59 days) and (94 days). However, demand softened in, where the DOM rose 3.0 percent to 113 days. New home demand weakened in (92 days) and ( days) as the DOM climbed 10.4 percent and 7.7 percent, respectively. The DOM trended upward to 125 days, while the DOM reached 86 days in. led the border metros with the highest new home median price of $172,429 followed by where the median price for new homes settled at $167,817. In, the median price for new homes decreased 7.8 percent to $167,527, and in s new home market median prices fell 1.0 percent to $155,899. The median price for existing homes was highest in at $162,835.,, and s median prices in the existing market were more similar at $135,023, $130,5, and $126,067, respectively. New and existing home prices along the border remained significantly lower than the statewide median at $287,949 and $209,573, respectively. 5

7 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-14 Jul-14 Jan-15 Jul-15 Jul-16 Jul-17 Note: Seasonally adjusted. For more information, see Texas Business Cycle Index. Source: Federal Reserve Bank of Dallas Total Construction Values ($) Jan-08 Jun-08 Nov-08 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12 Aug-12 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 6

8 Residential Construction Values (Index Jan 2008 = ) Jan-08 Jun-08 Nov-08 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12 Aug-12 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 = ) Oct-12 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 Jul-17 Note: Real values are seasonally adjusted and detrended. Source: Dodge Analytics 7

9 8 Employment Growth Rate (Quarter-over-Quarter Annualized Percent Change) Border Variable -10 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 May-11 Sep-11 Jan-12 May-12 Sep-12 May-13 Sep-13 Jan-14 Sep-14 Jan-15 May-15 Sep-15 May-16 Sep-16 May-17 Note: Seasonally adjusted, 3-month moving average. July 2017 is preliminary. For more information, see Employment Growth Rate. Source: Bureau of Labor Statistics Mexico Maquiladora and Manufacturing Employment (Index Jan 07 = ) Juárez () Matamoros () Reynosa () Nuevo () Jul-07 Dec-07 May-08 Oct-08 Mar-09 Aug-09 Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12 May-13 Oct-13 Mar-14 Aug-14 Jan-15 Jun-15 Nov-15 Apr-16 Sep-16 Feb-17 Note: Seasonally adjusted and detrended. Source: Instituto Nacional de Estadística y Geografiía 8

10 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-14 Jul-14 Jan-15 Jul-15 Jul-16 Jul-17 Note: Seasonally adjusted. July 2017 is preliminary. For more information, see Unemployment Rate. Sources: Bureau of Labor Statistics and Real Estate Center at Texas A&M University Total Private Employee Hourly Earnings (Index Jan 2007 = ) Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jul-11 Jan-12 Jul-12 Jan-14 Jul-14 Jan-15 Jul-15 Jul-16 Jul-17 Notes: Inflation adjusted, seasonally adjusted and detrended. July 2017 is preliminary. For more information, see Total Private Employee Hourly Earnings. Source: Bureau of Labor Statistics 9

11 $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 Jun-17 Note: Deflated using the Texas Trade Weighted Value of the Dollar. Source: Federal Reserve Bank of Dallas 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 Jan-12 Jun-12 Nov-12 Apr-13 Sep-13 Feb-14 Jul-14 Dec-14 May-15 Oct-15 Mar-16 Aug-16 Jun-17 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. 10

12 Housing 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 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 2011 = ) Jun-11 Nov-11 Apr-12 Sep-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 11

13 16 New Home Months of Inventory (Months) Jun-11 Nov-11 Apr-12 Sep-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 Sep-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 12

14 New Home Days on Market (Days) Jun-11 Nov-11 Apr-12 Sep-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 Sep-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 13

15 Housing Sales (Index Jan 2007 = ) Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jul-11 Jan-12 Jul-12 Jan-14 Jul-14 Jan-15 Jul-15 Jul-16 Jul-17 Note: Seasonally adjusted sales reported by MLS and detrended. Source: Real Estate Center at Texas A&M University 200,000 New Home Median Sales Price ($) 190,000 1, , , , , , , ,000 Jul-11 Jan-12 Jul-12 Jan-14 Jul-14 Jan-15 Jul-15 Jul-16 Jul-17 Note: Seasonally adjusted and detrended. For single-family homes. Source: Real Estate Center at Texas A&M University 14

16 170, , , , , , ,000,000 90,000 Existing Home Median Sales Price ($),000 Jun-11 Nov-11 Apr-12 Sep-12 Feb-13 Dec-13 Oct-14 Mar-15 Aug-15 Jun-16 Nov-16 Apr-17 Note: Seasonally adjusted and detrended. For single-family homes. Source: Real Estate Center at Texas A&M University 110 New Home Median Price Per Square Foot ($) Jun-11 Nov-11 Apr-12 Sep-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 15

17 Existing Home Median Price Per Square Foot ($) Jun-11 Nov-11 Apr-12 Sep-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 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