Spending, job creation and home sales spurred the Greater Waco Economic Index to an all-time high in October, with the number of houses sold and the value of those transactions setting records for the month, according to a report released this month by Amarillo-based economist Karr Ingham.
The local economy created 2,800 jobs during the 12 months through October, and area residents apparently began shopping sprees well before Black Friday, as spending rose 9.2 percent compared to October of last year, as reflected in sales tax receipts from Waco and nine of its neighbors.
Spending growth for the first 10 months of the year has risen a modest 1.9 percent compared to 2015. The cities for which sales tax is aggregated and analyzed by Ingham include Waco, Bellmead, Beverly Hills, Hewitt, Lacy Lakeview, Lorena, McGregor, Robinson, West and Woodway.
Ingham said the city of Waco issued 24 permits in October to build new homes within the city limits, the same as in September, but for the year through October the city has issued 340, which is 10 percent more than the 309 through 10 months last year. Ingham tallies only those permits issued by Waco, not those of its suburbs.
Ingham prepares a monthly snapshot of local economic activity for the First National Bank of Central Texas and the Tribune-Herald. Using data dating to the year 2000, he determined the index achieved a raw score of 124.3 in October, up from 123.9 in September and 120.2 in October a year earlier.
Greater Waco saw the sale of 239 single-family homes in October, a record for the month, and the year-to-date total of 2,336 also is an all-time high. Meanwhile, the average home sale price through the first 10 months of this year has reached $180,146, which is 5 percent more than during the same period in 2015.
Local real estate agents this year have marveled at the pace existing homes have changed hands this year, some veterans saying they’ve never seen anything like the demand they’ve witnessed for reasonably priced homes in hot markets such as Robinson, China Spring, Lorena, Hewitt and pockets of Waco.
But mortgage interest rates have risen since the presidential election Nov. 8 that saw Republican Donald Trump defeat Democratic nominee Hillary Clinton.
Still, rates remain in the range of 3 to 4 percent, said local and national industry sources, most of whom think the housing market will remain robust.
“Sure, rates have gone up, but not to a degree that would make buyers rethink their decision,” said Kathy Schroeder, vice president for residential services at Coldwell Banker Jim Stewart Realtors.
She said the pace of home sales locally has been so torrid it may continue through the holidays, usually a slower time for making deals.
Schroeder said in her 35 years in the real estate business she’s found that speculation about how things may change under a new president, regardless of party, is commonplace. She said she thinks President-elect Trump is “pro-business,” and that should prove beneficial to a local economy already performing well.
“In talking with some of the mortgage companies around town, I’ve heard of slight upward pressure on mortgage rates, but nothing catastrophic,” said Ron Nelson, who specializes in real estate lending at the First National Bank of Central Texas. “I’ve often heard the philosophy, and I don’t know if it’s been proven or not, that if folks are trying to make a decision on buying a house and they notice interest rates are going up, they get off the fence and decide they had better act quickly.”
Sandi Arthur, a loan officer in the Waco office of Cornerstone Home Lending, said this week she was seeing a 4.375 percent interest rate on a 30-year, fixed-rate mortgage for a borrower with good credit, “and I had been seeing closer to 4 percent.” A 15-year, fixed-rate mortgage was available at 3.75 percent interest, up from about 3.5 percent.
Jonathan Leatherwood, a loan coordinator at SWBC Mortgage in Waco, said rising mortgage rates could mean “more people feel the economy is getting better.”
“There is an inverse relationship between interest rates and mortgage-backed securities, which are considered safe when there is a lot of uncertainty in the marketplace,” Leatherwood said. “When the economy is better, people are willing to take more risks, maybe get into the stock market.”
This phenomenon, he added, makes mortgage-backed securities less appealing and puts upward pressure on interest rates.
Whitney Richter, manager of business development and marketing at the Greater Waco Chamber of Commerce, said the area is facing a shortage of housing stock. Inventory has dropped to 2.8 months, meaning it would take less than three months to sell every existing home now on the market at the current sales rate.
Kevin Vander Woude, an agent with Magnolia Realty, said inventory in some areas, namely China Spring, has fallen below one month.
Employment in the Waco Metropolitan Statistical Area, which includes Falls and McLennan counties, increased by 2,800 jobs during the year through October. The jobless rate fell to 3.9 percent in October, “which means we’re at full employment,” Richter said. Companies with staffing needs may have a tough time finding qualified applicants.
Greater Waco’s lodging industry continues to blossom, with hotel/motel tax revenue through October reaching $38.5 million, a 16 percent increase. Automobile spending through October totaled nearly half-a-billion dollars — $497 million to be exact — reflecting an 8 percent increase from the $460 million a year earlier.