Chip Gilmour & George McMahan
Record construction numbers, auto sales and job market fuel high mark for Lubbock Economic Index
Boosted by more record construction numbers, a healthy jump in auto sales and a solid job market, the Lubbock Economic Index posted a large increase in May, jumping to a record 150.3 for the month up from 149 in April, and up 3.1 percent from the same month a year ago. The 1.3 points added in May is the largest monthly increase since April 2014, and moved the year-over-year growth rate in the Lubbock Economic Index back above 3 percent for the first time since March 2016.
Chip Gilmour, Lubbock National Bank senior vice president, briefed the media on the report and was joined by land developer George McMahan, past president of the West Texas Homebuilders Association.
Here are their takeaways from the May report:
- Construction continues to rock on.
The May numbers were helped by $127 million in permits for Lubbock’s new Buddy Holly Hall of Performing Arts & Sciences and $22 million for a new Lubbock Cooper ISD elementary school.
The $205-plus million in building permit value was the highest single month ever and was 237 percent above May a year ago.
But McMahan said there’s more going on beyond those high-profile projects.
“You still see neighborhood shopping centers and restaurants going up. There’s a ton being built on Milwaukee and on Slide Road from 98th to 114th. The West End is amazing and there are more apartment houses,” he said.
“After the financial crisis of 2008 people had bad credit and the rental market was on fire. But now homes in the $200,000 to $250,000 range are selling in 30-60 days. Once you get over the $450-$500,000 sales curve it slows down,” said McMahan. “The speculative home market is also slower. It takes more money and people are particular. If it’s not what they want, they build what they want.”
“A few years ago we had four to five million-dollar-plus homes in Lubbock. Now we had four to five in the Parade of Homes,” he said.
Other impressive construction numbers from the report were:
- Number of home sales up 7 percent after being down previous month.
- Average home sale price up 3.2 percent.
- Dollar volume of residential real estate sales were up 8 percent.
- New home permits were up 91.7 percent and up 52.8 percent year to date.
Home building is historically high through the first five months of 2017, quoting from the report. Only in a handful of months over the 21-year history of the Lubbock Economic Index has the number of new single-family residence permits issued in a month been higher than the 138 permits issued in May. The total has exceeded that number only five times, and the last was in 2004. The 619 permits issued through May is a record total for the first five months of the year, eclipsing the 546 permits issued January-May 2005.
- Auto sales set a new May monthly record, 38 percent ahead of May last year and pulled up the year-to-date total into positive territory for the first time in 2017, up by 4.2 percent compared to the first five months of last year.
“When I talk to auto dealers, they’re doing well and investing in dealerships,” said Gilmour, noting Infiniti and Audi expansions in Lubbock.
- The jobless rate stayed at 3.2 percent and jobs grew 1.1 percent in May over the previous May as an estimated 1,600 jobs were added to the Lubbock economy over the last 12 months.
The creation of 1,600 jobs, said McMahan, creates the need for about 70 percent of the housing growth.
The report said, mining (oil & gas) and construction, trade/transportation/utilities/, professional and business services, and leisure & hospitality all posted employment gains over the last year, while manufacturing, information, education/health services, and government employment were down in May compared to May of a year ago.
Retail sales slipped 0.4 percent from May of 2016 … but up 0.8 percent year to date.
“People are still cautious and still concerned about what direction the country is going to go,” said Gilmour. “They’re not rushing to the stock market. Our CD activity is still very strong.”
Cotton continued to move up, which boosts the West Texas economy, but oil fell off a little.
Oil dropped to $45.06 a barrel in May, up from $43.38 from May of last year, but down almost two dollars a barrel from the previous month.
“The indication now is the price of oil will stay in the $45-52 range,” said Gilmour. A few months ago it looked as if it would climb above $60 a barrel. That’s good news at the pump for consumers, but not for growing the oil patch.
But McMahan pointed out when the energy sector is not as healthy, Lubbock and the South Plains gains people back for jobs.
Cotton continued to rise, up to $75.03 from $74.76 in April and 28 percent above last May.
“Cotton’s healthy and the recent rain hopefully will add to that,” said Gilmour.
Lubbock National Bank Senior Vice President Chip Gilmour briefs local media each month on the report.
To see the full report, click here
To see the Lubbock Avalanche-Journal story, click here