>> Texas Economy Set for Continued Growth, Though at a Moderated Pace

Following a period of exceptional economic expansion, the Texas economy is poised for continued growth in 2025, albeit at a more measured pace. While the state experienced robust growth in 2024, surpassing the national average, several factors are expected to contribute to a slight moderation in 2025.

One key factor is a projected slowdown in job growth. This is partly attributed to a decrease in in-migration, which has fueled labor force expansion in recent years. However, the energy sector remains a significant driver of the Texas economy, with continued high oil prices due to ongoing geopolitical tensions. The state’s favorable policies towards fossil fuels are anticipated to further support high-wage employment and income growth within the energy industry.

Texas has significantly benefited from broader economic trends observed across the United States since the pandemic. Its major cities have experienced substantial population growth and attracted numerous businesses, leading to robust job creation, rising incomes, and increased consumer spending. These factors, combined with the energy industry’s rebound, have fueled significant growth in the state.

However, the rapid pace of growth in 2024 is expected to moderate in 2025. While employment growth is projected to remain moderate and near 2024 levels, personal income growth is likely to slow down. This is primarily due to less turnover in the job market, which translates into slower income growth. Furthermore, consumer spending is anticipated to soften due to the impact of high interest rates, rising living costs, and moderating income growth.

The housing market in Texas is also expected to experience a period of adjustment. Residential construction is projected to rebound in 2025, supported by modestly lower mortgage rates and continued strong demand driven by population growth, job creation, and income growth in major metropolitan areas. However, growth in the multifamily housing sector is likely to be constrained by rising rental vacancy rates and tighter lending standards. Single-family home construction is expected to be the primary driver of residential growth.

House price appreciation is expected to moderate in 2025 due to increased housing supply. However, high property taxes and soaring homeowners’ insurance premiums pose significant challenges to the housing sector in Texas.

Sources of Information:

Federal Reserve Bank of Dallas: Regional economic reports and forecasts.

Texas Comptroller of Public Accounts: State economic data and analysis.

U.S. Bureau of Economic Analysis: National and state-level economic data.

Moody’s Analytics: Economic forecasts and industry reports.

Real estate market data providers: Zillow, Redfin, CoreLogic (for housing market data).