Economic outlook for Houston showcases modest growth amid uncertainty in housing and oil industries

In a recent budget workshop held on May 20, 2025, Houston officials discussed the city's financial outlook for the upcoming fiscal year 2026, focusing on key economic indicators that will influence revenue sources. The meeting highlighted the importance of property taxes, sales taxes, and franchise taxes as critical components of the general fund, which supports essential city services.

The Controller's Office presented a detailed analysis of various economic factors affecting Houston's financial health. Among these were housing sales, oil prices, job growth, and inflation. The discussion revealed a mixed economic landscape, with steady demand and expanding inventory in the housing market, yet concerns about affordability due to rising construction costs and home loan rates.

Oil prices, a significant driver of Houston's economy, are projected to remain modest, fluctuating between $56 and $63 per barrel. This uncertainty is largely influenced by global market dynamics, particularly actions taken by oil-producing nations. The city's economic performance is closely tied to these prices; higher oil prices typically benefit Houston, while declines can pose challenges.

Job growth appears promising, with projections indicating an increase of approximately 72,000 jobs in 2025. However, the potential impact of tariffs and ongoing inflation concerns adds a layer of caution to these forecasts. Inflation, which surged post-pandemic due to supply chain disruptions, has moderated but remains a concern, particularly as consumer confidence has dipped to its lowest levels in years. This decline in confidence may lead to reduced consumer spending, which could adversely affect sales tax revenues.

As the city prepares for the next fiscal year, officials are adopting a conservative outlook on revenue projections, particularly regarding sales taxes. The discussions underscored the need for careful monitoring of economic indicators as Houston navigates a period of uncertainty, balancing optimism about job growth with caution regarding inflation and consumer sentiment.

In conclusion, the budget workshop emphasized the interconnectedness of various economic factors and their implications for Houston's financial future. As the city moves forward, officials will need to remain vigilant and adaptable to ensure sustainable growth and fiscal stability in the face of ongoing challenges.