Location Strategy Chartbook 05.30.2026

In April, the personal savings rate hit 2.6 percent.

In last 60 years, it's only been lower than 2.6 percent twice.

(1) a very brief, very unusual period in the summer of 2022 when consumer spending was unleashed following years of cash stimulus and historically high savings

(2) in the twilight of the 2000s boom, just before the Great Recession

Federal Reserve, Christopher Waller: “Over the past several weeks, data on the labor market and inflation have validated this judgment. Recent jobs data show that the labor market appears to be stabilizing and the unemployment rate is fairly low and stable. But higher energy and commodity prices are pushing up headline inflation and prices for other goods. Inflation is not headed in the right direction. Based on this recent data, I would support removing the "easing bias" language in our policy statement to make it clear that a rate cut is no more likely in the future than a rate increase.

That doesn't mean, however, that I think we should be considering rate increases in the near future. While the labor market is on a more stable footing, it is not booming, and with monetary policy still at a restrictive setting, raising the policy rate could cause damage. The oil shock's effect on prices may dissipate soon, in which case raising rates may only begin to bite after inflation has started coming back down. But I can no longer rule out rate hikes further down the road if inflation does not abate soon, and that is especially true if measures of inflation expectations, some of which have risen lately, show signs of becoming unanchored.”

Percent of items with 3% price growth (a metric Waller popularized for inflation falling in 2023-2024) has leveled off at a higher rate, much higher than 2023-2024

Layoffs remain low. Initial claims below 2023, 2024 and 2025 levels

Continuing claims remain well below 2025 levels, and slightly below 2024 levels.

Continuing claims paint an overly rosy picture of the labor market, but the improvement has been large enough that we're also seeing it a little in the BLS data (unemployment due to permanent layoff barely rising or not at all)

After experiencing unusually weak job gains in 2025 due to heightened policy uncertainty, higher tariffs and sharply lower immigration, Texas employment has begun to pick up. Jobs in the state increased 1.7 percent in the first quarter. While this rate of growth appears promising, it has been limited to a handful of sectors, with professional and business services accounting for a sizeable share.

The recent resumption of growth in the sector bears watching. Employment services firms are often considered a leading indicator of labor market turning points because they can rapidly adjust headcounts in response to cyclical shifts. However, the outsized share could indicate that businesses prefer the flexibility of adding temporary workers over permanent staff amid heightened economic uncertainty. Nevertheless, the increased demand for temporary workers still signals an uptick in overall labor demand.

The unemployment rate in Texas has remained low and in line with the U.S. rate of 4.3 percent. Broader measures of unemployment, such as the U6 rate, which includes discouraged workers and part-time workers seeking full-time employment, declined from 8.5 percent to 7.9 percent during the first quarter, suggesting improvements in the labor market beyond the headline-unemployment rate.

However, Texas’ labor force participation rate ticked down further in March to 64.4 percent, a trend since September 2025, when the labor force participation rate was 64.9 percent.

While the labor market shows improvement, geopolitical factors are creating headwinds. The Iran war has negatively affected many Texas businesses, though impacts are distributed unevenly across sectors. Nearly half of special question respondents to the Texas Business Outlook Surveys (TBOS) in April reported a net negative impact. The burden fell more heavily on service sector firms (51 percent citing negative impacts) versus manufacturers (35 percent).

Though a smaller share of manufacturers reported negative impacts overall, those affected faced more widespread cost pressures. Across both sectors, the most cited factors were higher fuel and transportation costs, particularly among manufacturers (Chart 3). Among manufacturers reporting negative impacts, 87 percent cited elevated fuel and transportation costs as a primary drag, followed by increased uncertainty (44 percent) and higher non-fuel input costs (39 percent).

Despite Iran war-related disruption, headline indicators from the April TBOS point to economic resilience (Chart 5). On the manufacturing side, the headline production index jumped to 19.0 in April from 6.8 in March, well above the series average of 9.6. The new orders index was also positive for a fourth consecutive month and above its historical average.

Lennar—America's second largest homebuilder—is running a 19.7% sales incentives rate in its Texas/South Central division

That's $98,500 in incentives on a $500,000 sale

According to Lennar executives, they consider their "normal" baseline for incentives to be around 5.0% to 6.0%

LS Comment: there is a massive missed opp in development to differentiate. These market conditions highlight you can't just sell the same same homes that are largely undifferentiated from competition

Today's Buyers want:
-Architecture and detail
-Unique
-Design
-Personalized upgrades
-Usability/flow
-Light/windows
-Outdoor living spaces, landscaping, this is a feature point
-Walkability
-Amenities that add value to their daily life. From a development standpoint, pools are a cost to build for the developer and they are a cost to maintain for the owners. VS retail is a revenue generating opp and an amenity that enhances residents livability and lifestyle