Amarillo economist Carr Ingham says interest rates remain the root of many ills in the local economy, making home, car and other purchases less attractive and putting a wet blanket on the Greater Waco economic index.
“Spending is expected to decline in 2023, both in terms of general spending, as reflected by metro area sales tax receipts, and big-ticket auto spending,” Ingham said in his July report. “There is also a decline in hotel/motel activity. Construction has moderated after a massive and record start to the year, while home construction remains at a low for the year despite permits in July being higher than year-ago levels.
These factors combined meant the GWEI declined for the sixth consecutive month in July, falling to 151.0 from a revised 151.3 in June, said Ingham, who compiles the index using data dating back to the year 2000. The First National Bank of Central Texas and the Tribune-Herald sponsor his work.
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“Having interest rates in a better position will put us back on the path to growth,” said Chris Collins, chief industry recruiter for the Greater Waco Chamber of Commerce. He presented the July findings to business leaders on Thursday.
Despite the dire statistics, Collins said the risk of a recession has diminished, and Texas may be better able to withstand the shock than many areas.
“We’re usually last in, first out because of our diverse economy,” said Collins, who spiced up his GWEI discussion with improved economic growth news.
Building permits issued for large projects such as the new Baylor University basketball arena on the west shore of Lake Brazos, near Interstate 35, have contributed significantly to the value of non-residential building permits through 2023. The total value of the permits is $943 million. However, it declined to $69 million in July compared to $110 million in July last year.
But Collins said she sees better days after the July decline. For example, he noted the $1 billion high-tech paperboard recycling mill Atlanta-based Graphic Packaging is building locally. The company has secured permits for small structures onsite, but large-scale work is still pending. GlobalData, an online source of business news, recently reported that Graphic Packaging CEO Mike Doss visited the Waco site to attend the formal signing of the first of 2,600 pieces of structural steel to be hung there.
He also said New York-based BrightFarms will invest $180 million in hydroponic greenhouses in Lorena, where it will grow lettuce for shipment to grocery stores and other users. It will reportedly employ 60 people at each of four greenhouses occupying about 100 acres of land near Interstate 35.
Additionally, Collins said EstonJohnson, a global textile manufacturer, has begun operations at its new 220,000-square-foot “nonwovens” plant near Texas State Technical College. The highly automated, $40 million plant will produce two product lines, Collins said, adding that employees are well paid and typically work five 12-hour shifts weekly, allowing a lot of Overtime is accrued.
The housing industry in Greater Waco remains challenging. As of July the city had issued 311 permits to build new homes, a 33% decline from 467 as of July last year. Existing home sales reached 1,688 by July, down nearly 20% from 2,107 by July last year.
“We’re seeing more price reductions, and some builders are selling off their higher-end lots because they can’t sell them,” said Jenny McCaslin, an agent with White Label Realty Co. The “sweet spot,” accounts for half of total sales.
“High-end homes are not selling,” McCaslin said. “People are less willing to give up the 3% interest rates they now get on their homes in order to buy another home at double that rate or more.”
Worth noting, Ingham said, is that the median home sales price in July was $331,324, about 6% higher than the $311,920 benchmark a year earlier.
“The median price is also increasing, providing further support for the conclusion that housing prices are still rising,” Ingham said.
July marks the 14th consecutive month that existing home sales have declined year-over-year. But Ingham said this downturn should be kept in perspective, noting that “the Waco area housing market has been on a tremendous boom for the last 12 years,” so this year’s decline may look worse in comparison.
Meanwhile, retail spending reached $3.087 billion by July, a slight increase from $3.085 billion in the same month last year.
Spending on vehicles began to decline in 2022 and has continued to decline, while hotel/motel activity “was on an absolute decline post-COVID, setting new records in each of 2021 and 2022,” Ingham said. But it has fallen slightly this year, to about 4.3%, after that “stratospheric growth.”
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