Despite McAllen’s economy narrowing late last year, it has avoided declining wages that have plagued Texas border economies, according to a study from the Texas A&M Real Estate Center.
“In November, McAllen went through the sharpest contraction,” said A&M Research Economist Luis Torres, “but rallied recently behind strong employment figures. El Paso remains the most stable border economy, but stagnant wages persist there.”
McAllen has seen an uptick in homes sales, the study said, even though the number of monthly housing permits is down substantially. In first quarter 2017, El Paso’s housing permits jumped 47.7 percent as demand increased. The existing home months of inventory (MOI) in Brownsville and McAllen remains at 8.6 and 9.0 months, respectively.
“A glut of new houses in McAllen fueled the sales surge,” Torres said, “as the months of inventory (MOI) for new homes remains longer than 12 months and continues climbing. The opposite occurred in Laredo, where the lack of new homes contributed to a sales contraction and an MOI of less than four months. Brownsville and El Paso posted more typical border inventory levels for new homes at 6.7 and 7.1 months, respectively.”
While wages have dropped in Brownsville and Laredo, McAllen has not suffered the same hit.
“Wage decline has not hit McAllen,” Torres said. “Hourly earnings in McAllen are up 8.4 percent year-over-year and up 29.5 percent since July 2015. El Paso continues to post stagnant wages, which are still below pre-recession levels.”
Earnings have dropped 26.6 percent in Brownsville since 2012, according to the study. In the last year, Laredo earnings have fallen 8.8 percent.
The peso devaluation is, of course, a big factor, considering border economies are in many ways intertwined with both sides of the Rio Grande.
“Peso-per-dollar depreciation hinders border economies because it reduces consumption by Mexican nationals, particularly in the retail sector,” Torres said. “The Laredo and Brownsville economies rely heavily on cross-border business transactions and, therefore, are disproportionately affected by currency fluctuations.”