Oil Prices and the Impact on Our Real Estate Market
It comes as no surprise that lower oil prices will have an adverse impact on cities where local economies are heavily based on the production of oil. With Anadarko’s headquarters in The Woodlands, and the new ExxonMobil headquarters just a few minutes south, many people would suggest Houston is a prime candidate to take a hit.
Make no mistake; Saudi Arabia and OPEC do not want to keep prices at the current level. Once they rise again, production and jobs will increase back to $100 a barrel figures. In a short-term situation, we will see temporary job loss and cutbacks like we have already, and we will experience some declines in regards to the real estate industry as well. The question is simply, how much?
According to a report released by HouseCanary, after a thorough analysis they determined that oil price changes are a leading indicator of home values. They concluded that some cities will thrive off the lowered oil prices, and others will not. They found that oil towns like Odessa would be hit most significantly, “lowering the growth target from 20% cumulative growth in home appreciation to 10% through the third quarter of 2017.” Houston, although still negatively impacted, did not see such a dramatic drop. Instead, Houston is predicted to see only a 2% drop from 19% to 17% cumulative appreciation by the third quarter of 2017.
In Odessa, the community thrives predominantly on oil production. Houston, although it carries a heavy burden in this regard, has other sectors where employment can be found to help stabilize the economy.
Goldman Sachs commented on the subject, saying, “if we are correct, that weakness in oil-related employment will spill over into slower job growth in closely-related non-energy sectors.” Although the drop in oil price is not good news for Houston, the city does have alternative resources to help stabilize our local economy. This in turn will limit the damage that could have been seen if we were solely reliant upon oil and gas.
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