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Welcome to The Regional Outlook Texas, an analysis and forecast for two of the state’s largest regional economies. Each quarter, find updated data that goes beyond the state and national level to deliver a current snapshot of employment, home prices, consumer spending, personal income, and other leading economic indicators within key areas of the state. Visit your region of interest and subscribe for email delivery.
With the recovery of the Dallas-Plano-Irving (MD) labor market well underway, employment levels are nearing pre-pandemic highs despite some industries experiencing faster recoveries than others. Along with the steadily improving labor market, residential real estate has been a bright spot for the region. Demand remains high with prices rising sharply and sales activity growing over the last year despite historically low levels of inventory for sale.
Employment Levels Near Pre-Pandemic Highs
The Dallas-Plano-Irving (MD) labor market added 25,600 jobs in May, bringing nonfarm employment to 99.5% of February 2020 levels. This marks the fourth straight month of strong employment growth in Dallas-Plano-Irving (MD) following the declines in payrolls in January 2021 when COVID-19 cases were surging. The region’s unemployment rate declined to 5.5% in May, higher than in Austin (4.7%) but lower than Fort Worth-Arlington (MD) (6.0%) and Houston (7.1%). In addition, falling unemployment in Dallas-Plano-Irving (MD) is not the result of workers leaving the labor force. In May the region’s labor force expanded significantly, adding 11,400 workers. That said, the labor force is still 0.3% below pre-pandemic levels.
The largest jobs gains continue to occur in sectors hardest hit by the pandemic with the Leisure and Hospitality sector leading the pack, adding 9,500 jobs from April to May. This was followed by Professional and Business Services (4,500), Education and Health Care (2,700), Other Services (1,700), Information (1,000), and Manufacturing (1,000). May also saw payrolls decline in certain sectors, including Government (-1,200) and Wholesale Trade (-200).
With May’s additions, Dallas-Plano-Irving (MD) has now recovered 95% of the jobs lost in March and April 2020, well above of the 72% recovery rate in the state as a whole. This compares favorably to some Texas metros such as Houston (64%), but trails others, including Austin (105%) and San Antonio (98%).
The trajectory of recovery among the region’s industries has varied significantly. While industries such as Leisure and Hospitality and Other Services have seen strong growth in recent months, they still have significant ground to make up to recover all the jobs lost following the historic decline of April 2020.
With the state and region hitting vaccination targets, the restraints on employment growth that were in place at the beginning of 2021 have begun to ease. With more businesses returning to normal operations, Dallas-Plano-Irving (MD) will continue to add to its payrolls over the summer.
Demand for Housing High, But Supply Historically Low
The pandemic’s impact on the housing market has been relatively mild. Homebuyer sentiment took a hit early on, as buyers and sellers grappled with new constraints on the homebuying process. But, despite the second-quarter slowdown, the housing market is by far the brightest spot of the 2020 Dallas-Plano-Irving (MD) economy.
The strong performance of the region’s housing market is likely driven by three factors. First, typical homebuyers (higher income earners) have been less affected by the labor market fallout. Second, mortgage rates are at historically low levels, spurring purchasing activity. And third, inventory is at near historic lows.
Year-over-year price appreciation of existing single-family homes in Dallas-Plano-Irving (MD) grew 14.1% in the first quarter of 2021. Economic stimulus and low interest rates on mortgages have increased demand for housing throughout Texas. However, supply has not increased to meet these demands. In April 2021, there was only 1.0 months of housing supply in the Dallas-Plano-Irving (MD). For context, a balanced market typically equates to six to seven months of supply; a buyer’s market equates to seven months of supply and above; and a seller’s market is six months of supply and under (National Association of Realtors). This historically low inventory has pushed home prices up considerably over the last year despite weakness in the labor markets and low inflation. That said, the growth in home prices this year will eventually be unsustainable, and an uptick in interest rates should be expected at some point in 2021.
Demand for homes in the Dallas-Plano-Irving (MD) also remains strong. After the pandemic drove sales down during the second quarter of 2020, they surged in the second half of 2020 and the first quarter of 2021. Existing single-family home sales grew 1.8% in the Dallas- Plano-Irving (MD) from the first quarter of 2020 to the first quarter of 2021.
Given the underlying strength in the economy, and the increasingly diminished economic effects of the pandemic, a steady increase in the Dallas-Plano-Irving (MD) residential real estate market can be anticipated over the next year.