McAllen. Mission. Edinburgh. These neighboring cities in Hidalgo County in Texas' Rio Grande Valley have none of the name recognition of major economic centers, such as New York, Los Angeles, or Atlanta. Yet they, as the McAllen Metropolitan Statistical Area (MSA), are experiencing astonishing economic expansion, not to mention housing growth.
The McAllen MSA has the highest rate of job growth and the lowest cost of living in the United States. For the state of Texas, the MSA is tops in both population and job growth, beating out both Houston and Dallas/Fort Worth. At the same time, McAllen is also the most affordable housing market in the country.
Normally, fast economic growth and affordable homes don't go together. And most towns along the U.S.–Mexico border (McAllen is about four miles from the border) don't exhibit high growth at all. But this MSA bucks the trends.
A RIVER RUNS THROUGH IT In 1972, McAllen's population was slightly less than 40,000. It was a town dominated by citrus and produce farms. McAllen's proximity to the border brought Mexican citizens over to shop, so retail was another part of its economic pie. Export trade was the third piece at the time, with U.S. businesses transporting products through McAllen south to Mexico.
All was well until the late 1970s and 1980s. First came the oil bust that devastated Mexico's economy and led to the devaluation of the peso. That wreaked havoc with McAllen's retail and export businesses. Then several bad freezes destroyed citrus crops, ruining agriculture in the area.
With its main economic sectors on life support, the city leadership founded the McAllen Economic Development Commission (MEDC) in 1987 to diversify the city's commercial and business base. “We thought about what we had that would generate investment in McAllen,” says Keith Patridge, president and CEO of the MEDC.
Across the river is the Mexican manufacturing town of Reynosa, about 10 miles away. “Because of the peso devaluation, full-time, full-benefits [Reynosa] wage rates were about 85 cents an hour in 1988,” Patridge says. “And in 1989, they went down to about 35 cents an hour. Putting plants in Reynosa to compete with Taiwan, Korea, and Singapore was a big [investment] incentive.” MEDC began promoting Reynosa as a low-wage manufacturing center, without the transportation and tariff expenses of distant countries. They expected some companies would still locate on the U.S. side, but they also suspected that that those moving to Reynosa would also locate logistics and distribution centers on the U.S. side, where the market was.
They were right. Today, about 500 factories thrive in McAllen and Reynosa, the numbers almost evenly split between the two cities. Some 50 new factories were added in 2005, with another 50 expected for 2006.
As the number of manufacturers grew, more people moved into the area, including managers and executives. Parallel growth occurred on the Mexican side of the border. “That increased the need for retail and services for both U.S. and Mexican customers,” says Frank Pardo, director of business development and government affairs for MEDC.