Mella McEwen | Midland Reporter-Telegram (Midland, Texas)
Rising crude prices, lifted to about $105 a barrel by tensions between Ukraine and Russia and unrest in Iraq, gave an added boost to the Midland-Odessa economy in May.
“The impact has been showing up the last couple of months” with a sizable increase in the Midland-Odessa Regional Economic Index, said Karr Ingham, the Amarillo economist who prepares the index for Security Bank and Midland Development Corp.
The effects have been almost immediate, with the index showing much stronger increases over the last two months, he said. The index reported a sharp gain from April to May and is 5.6 percent above last May, he reported.
At the beginning of the year, Ingham and others had expected crude prices to soften a little — before global events in Ukraine and Iraq lifted oil markets.
“The reasons for prices to increase don’t much matter,” he said. “Prices increase and the industry responds.”
He said the result is an already-solid general economy that is enjoying more stout growth than expected this year.
“Off we go again,” he said, pointing to double-digit increases in retail spending as measured by sales tax receipts, which were 16.4 percent above last May and so far this year are 9.5 percent ahead of year-ago levels.
Automotive spending also remains strong, he said, with May spending up 5.2 percent compared to last May and are up 13.4 percent so far in 2014 compared to the first five months of 2013.
Ingham said construction “roared back into positive year-over-year territory” in May, with the $105.1 million in building permits. That’s 102 percent above last May’s $51.9 million. For the year, $373.7 million in permits have been issued in the two cities, down just 0.8 percent from $376.7 million in the same period last year, which was more than 32 percent higher than the first five months of 2012.
Midland and Odessa officials issued fewer new home permits in May, 123, down 7.5 percent from 133 last May. Fewer permits have also been issued so far this year, 547, down 6.3 percent from 584 to-date last year.
Existing home sales rose in May, with the 291 homes sold — up 8.6 percent over last May’s 268 homes sold. Year-to-date, 1,226 homes have been sold — up 0.1 percent from 1,225 last year.
Ingham said housing demand “clearly remains higher than the numbers would indicate,” but soaring home prices are limiting sales. May’s average sales price of $236,885 is 6.3 percent above last May’s average 222,837. The average sales price to-date this year, 235,618, is 10.6 percent higher than last year’s $213,071.
Those higher price are keeping a lid on activity as more potential homebuyers are being priced out of the housing market, he said.
“We’re not looking at static household income but, again, income is not going up as much as housing prices,” Ingham said.
There’s no way to tell when housing prices will reach their peak.
Residents have no choice but “to let it play out the way it plays out” and let time and increased housing inventory bring a very out-of-kilter market back into balance because the undesirable alternative would be a significant slowdown in economic activity, he said.