Texas economist Ray Perryman is forecasting stronger economic growth for the Dallas-Fort Worth area and the state — faster than U.S. growth — over the next five years thanks largely to the energy boom and big corporate relocations.
He told a group today at the Dallas Regional Chamber’s annual Economic Outlook Summit in Dallas that the Texas economy will grow at a 4.3 percent compounded annual rate through 2019. He expects the Dallas and Fort Worth areas to grow even faster in that time frame — 4.4 percent each.
Much of Texas’ growth — and national growth — has been related to energy. The state has tripled its oil product since 2010 to more than 3 million barrels of oil, said Perryman, head of The Perryman Group in Waco. Low crude oil prices may dampen oil exploration, but pumping will continue and longer term, demand will only increase for oil as emerging countries increase their consumption, he said.
The Dallas-Fort Worth economy is doing well across many segments, such as technology, health care and corporate relocations.
Newcomers to the area are driving the demand for housing.
Texas has led the nation’s housing recovery, especially in Houston and D-FW, David Brown, a regional director of Metrostudy in Dallas, said at the summit.
A short supply of houses in the area — less than three months — is driving up prices. The Dallas area has 10 percent fewer homes listed for sale today than a year ago, Brown said. D-FW prices rose about 12 percent last year and are on pace to be up 7 percent to 8 percent this year, which is still double historical appreciation rates, he said.
“We’re going to continue to see a very competitive housing market” as big companies such as Toyota move operations and people here, Brown said. “The challenges we face now are all on the supply side, and despite rising prices our housing remains extremely attractive for people moving here from somewhere else.”
About half of all housing demand is for apartments, Brown said. And even though D-FW apartment construction is booming, he doesn’t think the market is becoming overbuilt. Last year, 15,222 apartment units were absorbed into the market.
The national economy
After a “very, very difficult recovery,” the nation is now seeing consistent job and economic growth, Perryman said. He forecast U.S. gross domestic product growth of about 3.4 percent a year through 2019.
“We feel pretty good about the U.S. economy,” but there are some risks, such as the nation’s monetary policy, Perryman said. The Federal Reserve is walking “a tight rope” on when to start raising interest rates, which have been near zero since 2008, he said.
“If they raise rates too fast, it could hurt us and if they raise rates too slow, it could hurt us,” Perryman said. “If they do it right, we could have a pretty good recovery here; if not, we could have some issues.”
Scott Nyquist, a director at McKinsey & Co., said many of the consulting firm’s clients are frustrated about the global economy in the short term as slower growth is expected in Europe and China, but are optimistic about the longer term potential.
“It’s hard to be anything but excited about Dallas,” which has a youthful population and the nation’s third biggest high-tech hub, Nyquist said at the summit.
A study by the McKinsey Global Institute found that the Dallas area is well positioned in four drivers of the national economy over the next decade: energy, big data, infrastructure improvements and trade.
As the national economy improves and job opportunities improve in other places, the Dallas area must focus on quality of life and environmental issues, Nyquist said. Also, the area’s share of residents with a bachelor’s degree and STEM (science, technology, engineering and math) degrees is lower than the national average, he said.
Still, McKinsey expects the D-FW area’s economy to grow 50 percent faster than the U.S. economy over the next 20 years.