Bundle install fails on postgresql gem. (Yes postgres is installed)

I'm trying to run bundle install on a new machine. I just installed postgres.app and restarted terminal. running bundle install in my app returns this error.

Gem::Installer::ExtensionBuildError: ERROR: Failed to build gem native extension.

/System/Library/Frameworks/Ruby.framework/Versions/2.0/usr/bin/ruby extconf.rb
checking for pg_config... yes
Using config values from /usr/local/bin/pg_config
checking for libpq-fe.h... yes
checking for libpq/libpq-fs.h... yes
checking for pg_config_manual.h... yes
checking for PQconnectdb() in -lpq... no
checking for PQconnectdb() in -llibpq... no
checking for PQconnectdb() in -lms/libpq... no
Can't find the PostgreSQL client library (libpq)
*** extconf.rb failed ***
Could not create Makefile due to some reason, probably lack of necessary
libraries and/or headers.  Check the mkmf.log file for more details.  You may
need configuration options.

Provided configuration options:
    --with-opt-dir
    --without-opt-dir
    --with-opt-include
    --without-opt-include=${opt-dir}/include
    --with-opt-lib
    --without-opt-lib=${opt-dir}/lib
    --with-make-prog
    --without-make-prog
    --srcdir=.
    --curdir
    --ruby=/System/Library/Frameworks/Ruby.framework/Versions/2.0/usr/bin/ruby
    --with-pg
    --without-pg
    --enable-windows-cross
    --disable-windows-cross
    --with-pg-config
    --without-pg-config
    --with-pg_config
    --without-pg_config
    --with-pg-dir
    --without-pg-dir
    --with-pg-include
    --without-pg-include=${pg-dir}/include
    --with-pg-lib
    --without-pg-lib=${pg-dir}/
    --with-pqlib
    --without-pqlib
    --with-libpqlib
    --without-libpqlib
    --with-ms/libpqlib
    --without-ms/libpqlib


Gem files will remain installed in /var/folders/1p/11m5t6_j76xddb5wrkckgn8m0000gp/T/bundler20150524-32619-10b4nv5pg-0.18.1/gems/pg-0.18.1 for inspection.
Results logged to /var/folders/1p/11m5t6_j76xddb5wrkckgn8m0000gp/T/bundler20150524-32619-10b4nv5pg-0.18.1/gems/pg-0.18.1/ext/gem_make.out
An error occurred while installing pg (0.18.1), and Bundler cannot continue.
Make sure that `gem install pg -v '0.18.1'` succeeds before bundling.

Would be grateful for any suggestions on how to solve this. Thanks for your time!