As the national economy awakened in the last decade, Texas, like many states, enjoyed a rapid growth in construction opportunities. While indicators suggest that the national economy has reached peak expansion, all signs point to plenty of continued construction activity in Texas. Here’s why we think the 2019 forecast for Texas remains rosy.
This article summarizes some of the data collected by the Texas A&M Real Estate Center in their 2018 “Outlook for the Texas Economy” report.
Crude Oil Production at Historic Levels
Although the spot price on oil declined in 2018, Texas production remained at historic levels. As of early 2019, the oil extraction industry shows no signs of serious decline. This in spite of a slowing global economy and increased U.S. production holding down commodity prices. With 528 active rigs and the labor to work them, declining oil prices may have very little impact on the Texas economy in 2019.
Texas has been enjoying record unemployment and eight years of wage expansion. While this trend means the shortage of skilled construction labor will continue to restrain new starts, the backlog of projects should keep the building industry pulsing along throughout the next two years.
Goods-Producing Sector Set Job Creation Records in 2018
With the state’s diverse economy, declines in one sector may be readily absorbed by another. For instance, service industries experienced a noticeable decline in growth last year, but manufacturing set job creation records. Retail and restaurant growth appears to have peaked and reversed somewhat. While the hospitality/food service sector even declined, the low rate of unemployment month after month suggests worker mobility from the service industry to manufacturing. This stablized economic activity should remain solid going forward into the next two years, at least.
Housing Growth Plateau with Lowest Foreclosure Rate in Decades
Residential construction continues to rock, but growth seems to be hitting a plateau. However, Texas hasn’t seen foreclosure rates this low for decades. The statistics suggest that wage increases and low unemployment continue to generate strong housing demand, but rising interest rates and prices might be keeping new buyers from diving into the single-family homes they desire. Likely, these potential buyers are waiting for prices to come down before they seek to purchase.
Commercial Construction Remains Strong
If conditions prevent some first-time buyers from entering the single-family housing market, they still need shelter, pushing along multifamily housing projects. Additionally, offices, banks and hospital projects should keep the construction industry at full capacity throughout 2019 and 2020.
Consumer Confidence Continues to Rise
Texan consumers indicate greater confidence in the econonmy than the rest of the nation. With full employment and rising wages across most economic sectors, the state’s inhabitants plan to keep their wallets open for the foreseeable future.
Residential Construction Still Higher than National Average
Even with a leveling off of single-family residential construction, Texas lags behind the rest of the country in which many markets are showing signs of housing saturation. While the rate of growth has slowed, new construction continues at a higher rate than most other states. Plenty of opportunity for homebuilders should keep the market rocking straight through 2019. Past this year, however, indicators suggest housing may have acheived balance, bringing a plateau in home construction.
Growth Rate Leveling Off, but Construction Still Hot
While Texas contruction growth rates are levelling off, this doesn’t mean the boom is over. Builders might see their backlog of projects finally thinning out, but 2019 will keep them busy still. Non-building construction, such as infrastructure, is slated to increase across the nation by 3 percent. This includes many projects in Texas.
Texas Transportation Sector
According to Texas Contractor, in 2018, Texas voters approved $1.27 billion in transportation measures to enhance inadequate infrastructure. Across most urban counties, new highway, bridge and road projects now have basic funding to start. In addition to local bond measures, the federal government may release more funds through the Highway Trust Fund and other departments. The President has expressed his intention to modernize aging infrastructure, which, if successful, will contribute more construction projects to Texas.
All economic indicators point to a healthy construction industry in Texas through 2019 and 2020. While material prices and labor shortages will remain volatile, Texan concrete contractors should experience no downtime in the coming months.
Barnsco will remain your go-to concrete industry supplier. Whether your project is as small as a park pad or as large as an oil refinery, Barnsco wants to serve you. We have all the concrete supplies, project development talent and equipment rentals, sales and repairs to serve as your one-stop concrete supply partner. Give us a call today.
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Dr. Luis Torres, Wesley Miller, Paige Wooson. “Outlook for the Texas Economy.” Texas A&M University: Real Estate Center (Nov 2018). Retrieved from https://assets.recenter.tamu.edu/documents/articles/2046.pdf
Erica Bender. “2019 Texas Construction Industry Forecast.” Texas Contractor (Jan 3, 2019). Retrieved from https://www.acppubs.com/articles/8233-texas-construction-industry-forecast