Economic Growth in the El Paso Housing Market Area
HUD’s Comprehensive Housing Market Analyses provide information on changes in local economies, housing markets, and populations and provide 3-year forecasts for demand in the area. This article is part of a series that sheds light on the content of these analyses.
The economy of the El Paso, Texas housing market area (HMA) has been growing every year since 2010 — the longest growth streak in the area since the 1990s. The El Paso HMA added 8,000 jobs in 2016 and had an unemployment rate of 4.9 percent, the lowest unemployment rate in the area since the 1980s. Much of the HMA’s economic growth over the past decade can be attributed to robust trade and government sectors, rapid growth in the education and health services sector, and the expansion of the Fort Bliss Army Base. The latest Comprehensive Housing Market Analysis on the El Paso HMA examined these factors and others affecting the local economy and housing market in the area.
The El Paso HMA is the fifth-largest metro area in Texas, with an estimated population of 855,300 people. The HMA sits on the U.S.-Mexico border in western Texas across from the Mexican city of Juarez. This location makes the El Paso HMA a hub for trade with Mexico; according to the U.S. Department of Commerce, an estimated $30 billion in goods crossed the border into the El Paso HMA in 2015.
The government sector is the largest employment sector in the HMA, employing 70,300 people in 2016, or 22.6 percent () of the area workforce. The recently expanded Fort Bliss Army Base is not only the largest employer in the HMA, accounting for 47,325 jobs, but it also has an economic impact of roughly $24.1 billion, according to the state comptroller of Texas.
Since Fort Bliss began its expansion, nearly 16,000 military personnel have moved to the HMA, and with them came additional civilian government jobs. Although the HMA experienced job losses and declines in home sales during the recession, the area’s population increase created enough new jobs and enough demand for housing to cushion the recession’s blow.
Government-sector construction projects outside of Fort Bliss will contribute to strong economic growth over the next several years, including a new dental school opening at Texas Tech University in 2020 and a new medical center to replace the aging William Beaumont Army Medical Center that will open in 2019.
Other economic sectors in the El Paso HMA are growing, including wholesale and retail trade, which is the second-largest sector in the area. Because of its location on the U.S.-Mexico border, the El Paso HMA is a hub for international trade. Along with the estimated $30 billion in goods, an estimated 750,000 trucks and nearly 7 million people crossed the border in the HMA. Employment in the trade sector grew 2.8 percent to 51,800 jobs from 2015 to 2016. The large trade volume also creates growth in residual industries in the HMA such as transportation and warehousing.
The education and health services sector has led job growth since 2010, averaging 1,300 jobs or 3.4 percent growth per year, and the sector added 1,900 jobs in the HMA in 2016. Recent projects will keep growth steady in the sector, including the recently completed Hospitals of Providence Transmountain Campus, which is expected to employ 300 people by the end of 2017.
The El Paso HMA sales market has been meeting the demand for homes in the area with a vacancy rate of 1.6 percent in 2016, unchanged since 2010 and little changed since 2000, when the vacancy rate was 1.5 percent. Although the national vacancy rate rose during the recession, the Fort Bliss expansion protected the local housing market and helped keep the HMA’s vacancy rate steady.
In 2016, new and existing home sales prices rose by 2 percent and 5 percent, respectively, but prices are still lower than they were in 2007, before the recession. The demand for single-family home permits has also declined since 2013, signaling that the housing demand from the Fort Bliss expansion has been met and the market is now balanced.
The local rental housing and apartment markets are also meeting demand, with vacancy rates of 6.1 percent and 5.6 percent, respectively. The apartment vacancy rate rose during the Fort Bliss expansion because a large number of houses were constructed to meet the demands of the area’s growing population.
The average rent for an apartment in the HMA increased by roughly 1 percent over the past year. The vacancy rate was 6 percent during the Fort Bliss expansion but rose to 7.1 percent after the expansion ended. Demand for apartments decreased as new homes entered the market.
The El Paso economy will continue to grow steadily, with employment growth expected to average 1.9 percent over the next 3 years. Currently, 1,200 construction projects are underway, including a $600 million Border Highway West extension project and a $100 million streetcar project in the city of El Paso, which will spur additional economic growth.
Now that the housing market has balanced following the Fort Bliss expansion, housing demand in the HMA will moderate; an estimated 8,825 new homes will be constructed over the next 3 years, with demand declining in each successive year. Some of this demand will be met by the 590 homes in the HMA that are currently under construction and the 8,800 vacant units that may reenter the market.