North Texas UpdateThriving DFW Economy Expands Broadly

Federal Reserve Bank of DallasJune 27, 2018

Laila Assanie

The views expressed are my own and do not necessarily reflect official positions

of the Federal Reserve System.

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DFW is the economic engine of the North Texas region Largest MSA in Texas and fourth largest in the nation Diversified industrial base, thrives regardless of the booms and busts in

the state’s energy sector Job growth cooled to 2.4 percent in 2017 from 3.0 percent in 2016, but

outperformed the state’s 1.9 percent increase DFW economy heats up again in 2018, with employment growth at a 3.7

percent annualized pace or 55,500 net new jobs added through May Growth is broad based across sectors Unemployment near historical lows

DFW Economy Expanding at a Blistering Pace in 2018

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Dallas Job Growth Outdoes Texas 2013-2016

3.73.6

-5-4-3-2-10123456

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

DFW Texas

NOTE: Last data points for Texas and DFW are 2018 YTD annualized employment growth through May.SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; seasonal and other adjustments by the Dallas Fed.

Y/Y percent change, SA

DFW Job Growth Outpaces Texas 2013-2018

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Employment Growth Continues to be Broad Based

1.7 5.5

18.3 2.0 2.1

0.7 2.2

1.6 6.5

2.4 3.9

3.7

Information (2.3%)Other services (3.4%)

Construction & mining (6.2%)Manufacturing (7.5%)

Financial activities (8.2%)Leisure & hospitality (10.3%)

Government (11.9%)Education & health services (12.2%)

Professional & business services (16.6%)Trade, transportation & utilities (21.5%)

Private (88.1%)Total (100.0%) 2018 YTD

2017

NOTES: Data sorted by percent of total DFW employment. Data show seasonally adjusted annualized percentage growth by industry supersector for 2017 and YTD 2018 (December 2017– May 2018). Numbers in parentheses are shares of total DFW nonfarm employment and may not sum to 100 due to rounding.SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; seasonal and other adjustments by the Dallas Fed.

Job Growth Accelerates in DFW and Houston

3.7

0.9

4.4

-0.1

3.0

3.7

1.4

3.3

-0.1

2.82.4 2.3

2.7

1.72.1

3.74.1

2.8

4.4

0.5

-0.50

0.51

1.52

2.53

3.54

4.55

Dallas Fort Worth Austin Houston San AntonioNOTES: Data show seasonally adjusted annualized percentage employment growth for 2015-2017. Patterned bar shows annualized data for December 2017 - May 2018.SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; seasonal and other adjustments by the Dallas Fed.

Percent change, YTD SAAR

3.83.5

2

3

4

5

6

7

8

9

10

11

'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19

U.S.DallasFort Worth

Percent, SA

NOTE: Last data point is May 2018.SOURCES: Bureau of Labor Statistics; seasonal adjustments by the Dallas Fed.

Unemployment Close to Historical Lows

7

Expansion in Dallas Outpaces Fort Worth

80

90

100

110

120

130

140

150

160

170

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Dallas

Fort Worth

Index, Jan.'06=100

NOTE: Last data point is May 2018.SOURCE: Federal Reserve Bank of Dallas.

8

0

10

20

30

40

50

60

70

80

Natural increase International Domestic

Thousands

NOTE: Series spans 2005 – 2017. Estimates are not available for Census years (2010).SOURCE: U.S. Census Bureau.

Migration to DFW Remains Strong2005 2010 2017

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DFW Leads Texas Major Metros in Gains From Net Migration

10

‐100,000

0

100,000

200,000

300,000

400,000

500,000

600,000

DFW Houston Austin San Antonio El Paso

Net migration

NOTE: Data are for April 2010 to July 2017. SOURCE: U.S. Census Bureau, Population Division.

DFW Home Sales Rise Across Most Price Points

12

0

50

100

150

200

250

300

350

400

450

2011 2012 2013 2014 2015 2016 2017 2018

$250-499K$750-999K$500-749K$1 million+$0-249K

Index Jan 2011=100, 3MMA, SA

NOTE: Pie chart shows percentage of closed listings by price-point for May 2018. Series data through May 2018.SOURCES: MLS; Real Estate Center at Texas A&M University; adjustments by Federal Reserve Bank of Dallas.

$0‐249K48.3%$250‐499K

41.3%

$500‐749K6.9%

$750‐999K1.8% $1,000K+

1.7%

2017

Inventories Tight for Low- to Mid-Priced Homes

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10.0

7.5

5.4

3.0

1.3 0

2

4

6

8

10

12

14

16

18

20

2011 2012 2013 2014 2015 2016 2017 2018

$1,000+

$750-999

$500-749

$250-499

$0-249

Months of Inventory, SA

SOURCES: MLS; Real Estate Center at Texas A&M University; adjustments by Federal Reserve Bank of Dallas.

House Prices Ascend to New Highs

80

90

100

110

120

130

140

150

160

170

180

2010 2011 2012 2013 2014 2015 2016 2017 2018

Index, Q1 '08=100

NOTE: Index available through Q1 2018. Median home values for April 2018.SOURCES: MLS, Federal Housing Finance Agency Purchase-Only House Price Index. Series originally indexed to Q1 1991.

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Austin $303,628Dallas $281,810

Fort Worth $230,901Houston $236,101

Texas $228,137U.S. $259,081

Median Sales PriceApril 2018

Home Price Appreciation Begins to Moderate in 2018

NOTE: Data shown are year/year percent changes, except for 2018 which are ytd annualized growth.SOURCE: S&P/CoreLogic Case-Shiller Home Price Index.

Composite 20 Dallas San Francisco New York Chicago

2014 4.37 7.46 9.41 1.60 1.33

2015 5.55 9.46 10.29 2.85 2.33

2016 5.41 8.02 5.99 3.02 4.18

2017 6.28 6.91 9.25 5.61 2.52

2018 7.00 4.57 7.68 2.68 5.06

Multifamily Construction Elevated in the Metroplex

0

100

200

300

400

500

600

700

800

900

1000

1100

2010 2011 2012 2013 2014 2015 2016 2017 2018NOTE: Last data point is April 2018. Table 2018 YTD data for December – April.SOURCES: U.S. Census Bureau; seasonal adjustments by FRB of Dallas.

Index, Jan.'06=100, 5 MMA, SA

Single-family permits DFW

Multifamily permits DFW

Single-family permits Texas

Multifamily permits Texas

2017 2018 YTD 2017 2018 YTDDFW 15.8 2.3 16.1 5.0 Texas 10.5 3.3 1.0 11.2

Single-family (percent growth) Multifamily (percent growth)

DFW Apartment Market A Mixed Bag

SOURCE: Real Page Inc.

Metro AreaOccupancy

as ofQ1 2018

Annual rent growthas of

Q1 2018

Quarterly completions

as of Q1 2018 (units)

Under construction

as of Q1 2018 (units)

Dallas‐Fort Worth 93.9% 1.9% 7,000 32,400

Austin 93.2% ‐0.7% 2,600 7,600

Houston 93.2% 4.0% 3,300 7,500

San Antonio 91.7% 1.4% 1,600 5,900

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DFW Office Absorption Slows, Vacancy Rises

NOTES: Data through Q1 2018. Patterned bars and dashed lines denote partial year data.SOURCE: CBRE Research.

10

12

14

16

18

20

22

‐1

0

1

2

3

4

5

6

2010 2011 2012 2013 2014 2015 2016 2017 2018

Dallas Net Absorption Dallas VacancyMillions, sq. ft. Percent

Office Rent Growth Moderates, Houston Slumps

0

5

10

15

20

25

30

35

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Austin

Dallas

Houston

Fort Worth

San Antonio

$ per sq. foot per year

NOTE: Date through Q1 2018.SOURCE: CBRE Econometric Advisors.

Positive Outlook for DFW• DFW employment gains are broad based and continue to lead most other

major Texas metros this year• Professional and business services and construction sectors are driving job

gains• DFW continues to attract both international and domestic migrants• Multifamily construction remains elevated, the housing market continues to be

tight• Office market activity appears to be moderating • Solid job growth in DFW expected to continue

• Tailwinds: Sustained expansion in U.S. and Texas economies• Headwinds: Labor constraints and uncertainty regarding trade policies

Dallas Fed Publicationswww.DallasFed.org

Dallas Beige Book

Southwest Economy

Special Reports

DFW Economic Indicators

Texas Business Outlook Surveys

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