Home construction, hotel revenue and consumer spending pushed the Greater Waco Economic Index into record territory last month, and a West Texas economist who tracks area trends said only a national recession could derail the momentum Waco and its neighbors are enjoying.
Karr Ingham, of Amarillo, who prepares a monthly snapshot of local trends for the First National Bank of Central Texas and the Tribune-Herald, said the local economy has improved since a year ago in all the categories he studies.
Ingham noted that the last national recession was a decade ago.
“We typically don’t go that long without at least a mild downturn,” he said in a phone interview. “A recession could be out there. But I see no numbers to indicate it is on the way. I’m a fan of many of the steps President Trump has taken to stimulate business and improve the economy’s performance. But his tariffs are not economy-growers, they are economy-killers, and their impact could trickle down to Waco.”
The monthly index, which began in 2010, is based on economic data dating to 2000, which is pegged as a 100 on the scale.
In his report released this week, Ingham said all components of the GWEI are improved from the second quarter and first six months of 2017. The index achieved a raw score of 129 for the month of June, up from 128.6 in May and 126.4 in June of last year. The local economy has seen mostly steady growth “following the ultimate post-recession trough in the index of 99.9 in January 2012,” Ingham wrote.
Housing construction “is shattering records through mid-year,” with the city of Waco issuing more than 300 permits to erect new homes during that period, an all-time high. The number of permits issued during the second quarter was up by 50 percent, “and is easily the highest quarterly total on record, not just for the second quarter but for any quarter,” Ingham wrote in his report.
Sales of existing homes dipped slightly in June from May, but the 857 sold during the second quarter represented a 6.7 percent increase from 2017, while the 1,404 sold through June exceeded last year by 5 percent.
Russell Jones, who makes loans on commercial and residential construction and property acquisition, said demand is partly driven by investors from outside the city who have become enamored with Waco.
“I’ve seen interest in properties priced as low as $30,000 to as high as $150,000,” said Jones, speaking by phone. He said he also is seeing increased demand from builders wanting to erect speculative and custom homes.
Jones is also seeing considerable interest from builders wanting to place homes in Lorena, China Spring, McGregor and Crawford.
Jones said the housing market continues to thrive despite a steady increase in the cost of materials over the past year to 18 months. He said builders are reporting price increases of 30 percent or more on some supplies, with demand and surging lumber costs fueling the trend.
Homes changing hands in June carried an average sales price of $234,275, a more than 10 percent increase from the same month a year earlier. Year-to-date through June, the average stood at $197,344, a 3.9 percent increase.
“The total inflation-adjusted dollar volume of home sales activity posted solid year-over-year growth for June, the second quarter, and first half of the year, all at record levels,” Ingham wrote. “The market is solid and well-performing in Waco, and the strength of the housing market provides a firm underpinning to the general health of the overall Waco economy.”
After a sluggish start to 2018, general spending is gathering steam, with June retail sales increasing 5.6 percent from the same month last year, and year-to-date sales through June climbing by nearly 3 percent.
“For the 12 months ending June 2018, spending is up by only about 2.1 percent compared to the prior 12-month period, so the uptick in spending growth rates is encouraging and reflects a stronger overall economy in the Greater Waco metro area,” Ingham wrote in his report.
The cities for which sales tax is analyzed include Waco, Bellmead, Beverly Hills, Hewitt, Lacy Lakeview, Lorena, McGregor, Robinson, West and Woodway.
On a negative note, employment growth is “disappointing,” considering the robust performance of other economic sectors, Ingham said.
At 0.7 percent, the employment growth rate in June placed the Waco Metropolitan Statistical Area 20th among the 26 MSAs in Texas, according to Ingham’s report. The Waco MSA includes Falls and McLennan counties.
“The actual payroll employment total is at record levels, but again the hope and expectations would be for higher rates of year-over-year growth,” said Ingham. He said the Waco metro area’s jobless rate continues to fall, dipping to 4.2 percent in June from 4.5 percent in June a year earlier.
Kris Collins, senior vice president for economic development at the Greater Waco Chamber of Commerce, said the figures do not worry her.
“We typically see a small dip in numbers during the summer, and there are a few reasons for this,” she said in an email message. “A significant student population departs during the summer months, which becomes reflected in June and July numbers. In addition, there are individuals that work at schools performing various services, including food service, that (become) temporary layoffs during the summer break, also reflected in June and July numbers.”
Addressing job growth in McLennan County, she said, “There are 4,627 more people employed in a year-to-year comparison, a 4.2 percent increase. So while our unemployment rate remains low, the job market remains strong, which is attracting individuals to employment opportunities.”
Hotel/motel revenues continue to surge, with spending on lodging increasing 24 percent during the second quarter and 16 percent during the first six months. June enjoyed a 17 percent increase, Ingham said.
Lodging revenues are poised to increase, as work continues on five new hotels in Greater Waco and permits have been issued for two others. These projects will create 795 additional rooms for Waco, “meaning we won’t have to divert travelers to Hillsboro or Temple during our big events, which means the loss of revenue,” said Carla Pendergraft, director of marketing for the Waco Convention and Visitors Bureau, who prepared the rundown.