Mortgage rates top 7 percent as McAllen housing supply stays high

With more than nine months of homes on the market, the work starting this week in the Valley is commercial: building shells and tenant finish-outs.

The average 30-year mortgage rate rose above 7 percent this week, and McAllen still has more than nine months of housing supply on the market. Together, those two numbers argue against starting unsold homes in Hidalgo County right now. Housing permits in the McAllen metro fell again in August, and no city reported a pickup in September home permits. The work with firm start dates is commercial, mostly building shells and tenant finish-outs that begin within the next week.

Permits and starts

Neither Hidalgo nor Brownsville has published a September single-family permit count. Harlingen’s August report is still the most recent hard number: 38 homes permitted in August and 219 so far this year.

Permits for new housing units in the McAllen metro, all types combined, fell to 431 in August from 506 in July and 744 in June. A comparable figure for the Brownsville metro was not available.

McAllen’s published permit count moved from 1,927 to 1,928 on Sep 25, when a late filing for a Champs store was added. Counts in Mission, Edinburg, Pharr, Weslaco, Donna and Mercedes were unchanged from Sep 23. City counts usually trail the underlying filings by several days.

Five commercial projects have filed start dates within the next week, and those are the jobs contractors can price now.

The CareNow clinic in Mission is filed at $6.5 million for 2,250 square feet, about $2,889 per square foot, with work starting Oct 30. That is far above typical clinic construction costs, so subcontractors should confirm the scope with the design professional of record, Jose Ricardo Guerrero (license 1426), before pricing. Valley Regional’s emergency room addition is filed at $14.8 million, with a Feb 2, 2027 start. A generator project in Pharr lists a start date earlier than its filing date.

On Sep 22, the Brownsville City Commission gave first-reading approval to a rezoning at 835 South Indiana Avenue, a nine-lot single-family development at 1903 Grove Lane, and an event center permit at 3231 Pablo Boulevard. No project values or contractors have been named, and none of the three can start before final approval and permits. Harlingen has an escrow item on its Sep 29 agenda with no dollar amount attached. McAllen’s desalination plant remains a 2027 project, with two cost figures in circulation, $182.7 million and $204 million.

Materials

Gulf Coast diesel averaged $6.177 a gallon for the week ending Sep 21, up 15 cents from $6.027 the week before. The national average is $6.529. Fuel surcharges on haul tickets should follow the $6.177 figure, and reports of diesel near $7 are anecdotal. The next weekly figure is due Sep 29.

A 2x4x8 stud costs $3.98 at big-box stores, unchanged from Sep 22 to Sep 24. The lower $3.58 price applies only to bulk orders. The local lumber yard charged $3.49 when we last checked on Sep 11, and if that price holds, the big-box stud costs about $490 more per thousand. A 20-foot length of #3 rebar is $7.38 at big-box stores and was $5.79 at the local yard on Sep 11, a difference of about $159 per hundred pieces. The $8.67 rebar price is for bulk orders. Lumber futures settled at $537.00 on Sep 24, up $2.00.

OSB sheathing is unchanged at $13.48 a sheet. A bag of Quikrete is $6.24, and the $8.98 and $11.10 prices are for larger bags. The most recent national price for cement block, $2.46 from Jul 13, is now 76 days old. No concrete plant in the Valley publishes its prices. Deck screws at a Mission big-box store dropped from $29.88 to $24.88. Copper settled near $6.69 a pound on Thursday.

Typical build time in the Valley is 9 to 11 months. With construction producer prices up 10.09 percent over the year through August, a contingency of 5 to 8 percent is still appropriate. For any pour in the next 45 days, check local yard prices before buying studs and rebar at big-box stores, and hold haul surcharges to the $6.177 diesel price until the Sep 29 update. Lumber for jobs three months out can wait, but surcharges already owed will not change.

Labor

No enforcement action at a construction site in Hidalgo or Cameron County was reported this week, and the lack of reports says little on its own about crews or wages. Texas agencies have signed eleven new 287(g) agreements with federal immigration authorities since Sep 15, all outside the Valley. The most recent estimate, covering the period through March 2026, counted 13,377 apprehensions and put construction at 18 percent of the noncitizen workforce. There is no current measure of crew availability for September.

The McAllen and Brownsville-Harlingen metros added a combined 1,800 jobs through August. McAllen gained 2,900 jobs, to 308,100, while Brownsville-Harlingen lost about 1,100, to roughly 159,500. Construction employment was 9,900 in McAllen, up 2.1 percent, and 3,600 in Brownsville-Harlingen, down 5.3 percent.

Unemployment in August was 6.3 percent in the McAllen metro and 6.5 percent in Brownsville-Harlingen, not seasonally adjusted, and the next local release is Oct 16. Neither market is short of workers. Fluidstack’s plan for more than 2,500 construction jobs is still only a plan. For now, housing supply and a 7.03 percent mortgage rate hold back new home starts more than labor does.

Housing market

McAllen had 9.1 months of housing supply in May, the latest figure available, with a median sale price of $257,750. Single-family homes alone had 7.7 months. Brownsville had 5.8 months overall and 5.1 months for single-family homes. At the end of July, McAllen had 3,608 homes listed for sale, up 9.97 percent from a year earlier, while Brownsville had 1,700, down 4.66 percent. McAllen’s typical home value was $191,508, essentially flat. Statewide, Texas has 5.5 months of supply.

The average 30-year fixed mortgage rate was 7.03 percent in the week of Sep 24, up from 6.95 percent the week before and 6.30 percent a year earlier. Local press reported that home sales in Brownsville-Harlingen fell 17 percent through August.

Local builders are leaning on incentives. Esperanza is offering a 4.99 percent rate on select homes, or up to $20,000 in flex cash, under terms dated Jul 24, which puts its rate 2.04 points below the market average. Its Indigo plan in Edinburg is listed at $239,990 for 1,172 square feet, and the larger Bahia homes at $264,990 are discounted. Offers like these are a sign of a soft market.

Major projects

Avanti Legacy Del Sol, an 84-unit senior community at 2151 Laredo Road, has opened. Its cost is reported at $21.7 million in local press and $22 million in the city notice. The contractor has not been disclosed, and the next milestone is lease-up.

Edinburg holds a hearing on Oct 6 that could affect data center development. The mayor has said a special use permit would be required and that no applicant has come forward, and the city’s notice does not mention data centers. Separately, Gov. Greg Abbott’s Sep 21 letter directs state regulators to pause new data center permits until the state grid operator finishes its review, with a report due Oct 19. Permits already issued are not affected. Fluidstack has reserved 1.5 gigawatts for a $4 billion first phase near Rio Hondo, announced Sep 24, but has filed no building permit and has not broken ground. Saronic’s project remains a 2028 contract with an undisclosed value.

Starbase commissioners voted on Sep 21 to annex about 7,133 acres. The minutes had not been published as of Sep 25, so the annexation is not yet on record. Flight 14 had not launched as of Sep 27, with Sep 28 the earliest possible date, and an expected $40 million water deposit had not arrived. Lithium Universe’s $607 million study has no lease and no start year. McAllen’s capital improvement workshop, which included about $12.1 million in airport work, has not yet produced any contracts. If this week’s commercial starts slip, the next large project on the calendar is Sonrisa, filed at $39.05 million with a Dec 11 start.

Our view

We would hold off on unsold homes in Hidalgo County for the next 60 days. This week’s opportunities are the scheduled commercial shells and finish-outs. Check local yard prices before buying studs and rebar at big-box stores, and reset haul surcharges to $6.177 diesel.

That view rests on three figures read together: McAllen’s 9.1 months of supply in May, its 3,608 listings at the end of July, up 9.97 percent from a year earlier, and a 7.03 percent mortgage rate. In Cameron County, Brownsville’s 5.8 months of supply, the missing city permit count and falling construction employment argue for the same caution. Builder incentives such as Esperanza’s point the same way. Our confidence is high on the mortgage rate, the 431 permits, diesel prices and the commercial filings. It is lower on the May inventory figure, which is aging, and on local yard prices, which we have not rechecked since Sep 11.

Forecast record

We forecast that Gulf Coast diesel would hold at $5.754. It rose to $6.027 for the week ending Sep 14 and to $6.177 for the week ending Sep 21, so that forecast was a MISS. A plaza start scheduled for Sep 7 passed without a public groundbreaking, which we grade a PUSH. Our forecast on the Canadian sheathing duty, in effect since Aug 22, was a HIT, and buyers of Canadian sheathing should still get the country of origin in writing.

Housing market data: Redfin, Zillow and Freddie Mac.

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