Hardly a day goes by without hearing or reading about oil prices. Have they gone up or down? What is the current rig count? Where are the current supply levels? Are firms starting to close operations? What is the going price for a barrel of crude?
With all the concern over oil prices, many people are worried that the Texas economy could begin to mirror the U.S. economy in the 1980s. But from what we’re seeing so far, this situation does not appear to be a repeat of that era, when there was a dramatic decline in oil prices which had a major negative impact on the economy and housing markets across the U.S.
In fact, since Texas is home to a number of large corporations, and has been experiencing strong economic growth since the recession, there could very well be a positive ripple effect throughout the region. While the decline in oil prices certainly slowed Texas’ economic growth, the economy continues to expand at a moderate rate.
One of the strongest indicators of the state’s resiliency is employment growth. Over the past 12 months (June 2014 through June 2015), approximately 276,400 workers were added to the payrolls — a 2.4% increase. This increase surpassed the national rate of 2.1%. And with the exception of manufacturing, mining and logging, all of the employment sectors added workers. During the first 6 months of 2015, Texas ranked fifth in the nation in terms of job growth, after being second to California for all of 2014. The state’s unemployment rate moved from 5.0% in June 2014 to 4.2% in June 2015, remaining about 1 percentage point below the national average.
Except for Wichita Falls, all of the metro areas in Texas had more jobs in June 2015 than a year earlier. Houston and Dallas account for about 25% and 20% of the state’s workforce, respectively. While Dallas’ employment base continues to expand in 2015, Houston’s has shrunk. In the first half of 2015, Dallas recorded the largest job gains in the U.S. Other major contributors to the employment picture are Austin, Fort Worth and San Antonio. The job market in Austin, Dallas and San Antonio remains tight, with a jobless rate under 4%. The jobless rate for Houston and Fort Worth is between 4% and 5% — both less than the national average.
Positive employment and income trends have resulted in stronger-than-average population growth. This has created demand for housing and provided a boost to the construction industry. Both single- and multi-family permits are on the rise. At mid-year, home sales had increased 7% year-over-year, and the median home sales price was up 8%. Both Fort Worth and San Antonio saw sales increases of nearly 20%, and prices in Dallas were up 12%. The inventory of homes in the state stands at 3.6 months, well below the 6 months that is generally considered a balanced market. In Austin, Dallas and Fort Worth, the supply of homes is less than 3 months, with Houston being slightly higher at 3.2 months.
While the state continues to face the negative effects of lower oil prices, we expect that the Texas economy will grow in 2015 and into 2016, likely surpassing the nation’s rate of growth. If oil prices remain at the current level — below $50 per Bbl — there will likely be some ongoing weakness. However, the strength of the housing market should help offset some of these adverse factors. Oil prices are predicted to rise in the coming years, which should provide more balance to the state’s economy. Additionally, today’s economy is more diverse and should provide a more stable environment than that of the 1980s.Tags: Economy, Mortgage Industry