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Page added on March 5, 2016
The Impact of Oil, Gas on the US Housing Market
Just a few years ago, the industry was in an upcycle – oil prices were high, drillers had discovered new ways to extract oil and gas and jobs were plentiful in the oilfield. Workers flocked to oil-rich cities like Houston; Midland, Texas; and Williston, North Dakota. The housing markets in these areas saw a heavy increase in home sales. But these days, sales have slowed down quite a bit.
“We are not excelling anymore. We are maintaining,” Warren Ivey, managing broker and owner of Century 21 The Edge and regional vice president of the Texas Association of Realtors, told Rigzone. “While we’re not seeing a tremendous increase in prices on a monthly basis, we’re holding our own. The median price of a home last quarter (4Q 2015) was up by 0.3 percent.”
Ivey, who has worked in the Midland market for 10 years, said a balanced market should have 6-6.5 months of inventory. Currently, the Midland market has 3.5 months of inventory.
“A year ago, we had 2.4 months of inventory, so [sellers] were doing better then,” said Ivey. “Sellers are aware that we sold their properties within 17 days on the market last year. Now the average number of days on the market is 52. Our sellers aren’t panicking, but they’re asking what’s wrong?”
The significant decline in drilling activity in the Permian Basin plays a factor. The single family residential renting market in Midland has also been affected, noted Ivey.
“Prices have gone down and inventory has gone up,” he said.
Ivey believes this is due to many of the migratory workers – guys who were living in Midland and working on the drilling rigs.
“The people it took to operate those units were a migratory workforce. We saw a lot of them come in from places like El Paso, where the husband came and left the mother and children at home,” said Ivey. “When the overtime stopped and drilling activity slowed down, those workers probably went back home. They aren’t going to be re-leasing their homes.”
A Builder’s Perspective
Michele Marano, a Houston real estate agent and CEO of Real Estate for the Energy Professional, said builders – both national and statewide – who have deep pockets and have been in this situation before will have taken advantage of high sales before the prices of homes declined.
“The larger builder projects a turn in the market and has already factored lower prices into their inventory costs and longer carrying times,” Marano told Rigzone. Eighty percent of Marano’s clients are in oil and gas. “If they can’t carry property for six months or longer, those are the builders who will [hurt during this downturn]. The bigger guys have been through this before.”
John Sullivan, principal for Sullivan Brothers Builders, a homebuilder who constructed homes in the Springwoods Village community next to the new ExxonMobil campus just north of Houston, told Rigzone that he has not seen much of a slowdown in the housing market there.
Sullivan Brothers is responsible for building all of the homes in Harper Woods, an 88-home community in Springwoods Village. Right now, the community is halfway built out and Sullivan expects it to be fully built out within another year to year-and-a-half.
Sullivan said 40 percent of Harper Woods homes are ExxonMobil or Southwestern Energy clients; the rest are professionals in other industries. Prices for Harper Woods homes range from $350,000 to $650,000. Sullivan said home prices have not been impacted heavily by the price of oil.
“Our clients are not buying starter homes. These little spikes in the market, you have to get through it … and hold your prices,” said Sullivan.
Sullivan said Harper Woods currently has five built un-sold homes. Typically, they keep five to 10 available homes. They’re not overly concerned with the present market shift.
“This is our third down cycle. We’re in it for the long haul.”
Luxury Homes Taking a Hit
Houston’s higher end housing market hasn’t fared as well during the market shift.
By definition, luxury real estate is property that has an appraised value of more than $1 million, however the term is thrown around a lot in the real estate industry and used quite loosely, said Marano. The meaning is weighed heavily by location, but can also vary based on one’s perspective and means of style.
“According to the Houston Association of Realtors (HAR), homes priced at $500,000 and up have had a decline in sales every month since September 2015,” she said. “That market is taking the biggest decrease in sales.”
A monthly report by HAR revealed that Houston saw a 22 percent drop in luxury home sales in November 2015.
Sandie Parker, realtor for Martha Turner Sotheby’s International Realty, said homes ranging in price from $300,000 to $500,000 will be the safest.
Parker works specifically in the Energy Corridor of Houston, an area which encompasses several energy companies including BP America, Shell Oil Company and ConocoPhillips.
“Houses priced above or below those numbers will be impacted more,” she said. “I am seeing homes in the million dollar range drop in price and sit longer.”
Parker added that sellers who aren’t happy they have to reduce their home prices have got to be “a little more realistic” in terms of the state of the market.
As the oil and gas industry’s downturn lingers on and companies find ways to adjust to the new normal, housing markets in regions big on oil and gas are feeling the effects of a market shift.
“The people who will come out on top are the people who understand this market,” she said. “Timing is the most relevant factor in Houston’s real estate market today.
Houston’s housing market began 2016 with a strong month of sales, according to HAR’s January 2016 report. Single family homes ranging from $150,000 to $250,000 experienced a year-over-year sales increase by nearly nine percent while total property sales were unchanged.
“Now is the time to watch for deals. This will be a year to pay attention to pricing. You have to have the ability and smarts to know when to enter and when to exit,” said Marano. “If you are a home buyer, you have more choices now and you could use this to your advantage, but you have to have someone who can negotiate deals. If you are an investor, you have to be smart at timing and location. I will definitely be looking at the market closing this year for myself and probably find deals that would not exist if the price of oil wasn’t as low as it is now.”
14 Comments on "The Impact of Oil, Gas on the US Housing Market"
penury on Sat, 5th Mar 2016 11:56 am
isn’t it amazing, the economy is composed of items which are related based upon the health of the “economy”
Outcast_Searcher on Sat, 5th Mar 2016 1:55 pm
Pointing out that in oil and gas producing areas that oil and gas is hard on the local economy isn’t exactly rocket science. This has been in plenty of articles in the news this year.
OTOH, low energy prices are letting Americans generally have quite a bit of extra spending money for other things in their pockets, which helps the broader economy, including general housing affordability.
In the US, house costs and rents have tended to be relatively strong the past couple years or so.
Actually, if housing in places like Houston is roughly holding its own with oil between $26 and $36 recently, that seems like surprisingly good news.
Mark Ziegler on Sat, 5th Mar 2016 6:50 pm
And when the price of gasoline goes back up it will create its own widespread recession.
Apneaman on Sat, 5th Mar 2016 7:07 pm
Outcast
What country or planet are they spending the supposed savings on? Oil has dropped in price by 70% yet retail is getting worse. No spending – full of shit again.
U.S. retail sales end 2015 with a whimper
“For all of 2015, retail sales rose 2.1 percent, the weakest reading since 2009, after rising 3.9 percent in 2014.
Retail sales excluding automobiles, gasoline, building materials and food services fell 0.3 percent after a downwardly revised 0.5 percent rise the prior month.”
http://www.reuters.com/article/us-usa-economy-retail-idUSKCN0UT1JH
Lag time?
Hot Houston Housing Market Chills As Energy Prices Dip
Houston is expected to lose its crown as the king of new home construction this year
http://www.curbed.com/2016/3/3/11154552/houston-dallas-housing-prices
Anonymous on Sat, 5th Mar 2016 7:08 pm
The idea that subsidized energy is ‘helping’ americans is questionable on many levels. Cheap(er) gas provides little, if any relief to crushing debt loads. To use but one example. And if you’re under-or unemployed, then cheap gas is again, of marginal utility. IoW, the ‘benefits’ to typical consumer-slave in the american empire are not distributed evenly. Where I live, gas is cheap(ish), compared to what it might be, but unemployment is high(still) and food prices are way up this year.
Sure airlines might be happy but virtually all mass air-travel is discretionary to begin with. Nor will cheap gas help you much with your underwater, leveraged uS mortgage, where you can often times have a hard time proving who even legally holds it.
Go Speed Racer on Sat, 5th Mar 2016 7:26 pm
Hey everybody, take a look at this.
http://www.platts.com/latest-news/oil/houston/baker-hughes-us-oil-rig-count-slips-to-lowest-21047118
Outcast_Searcher on Sun, 6th Mar 2016 3:15 pm
Of course Apnea. Ignore the good recent employment news. Ignore improving housing, with higher demand despite higher rents/prices. Ignore the continuing improvements in GDP.
Cherry picking the statistics for doom isn’t an impressive economic forecasting tool, but have fun with that.
GregT on Sun, 6th Mar 2016 3:29 pm
“Of course Apnea. Ignore the good recent employment news. Ignore improving housing, with higher demand despite higher rents/prices. Ignore the continuing improvements in GDP.”
Difficult to ignore for sure. Been hearing the great news for 8 years now. Strange how the economy still hasn’t recovered yet. Something does not quite add up here. Wonder what it could be?
Apneaman on Sun, 6th Mar 2016 3:30 pm
I will ignore the recent employment propaganda and me thinks your the one who has no context. I bet your too young to have experienced a real healthy economy.
We have traded building cars for mixing drinks: This year the US added nearly 300,000 waiters and bartenders, and zero manufacturing workers. Manufacturing was once 33 percent of all jobs and now it is below 10 percent.
http://www.mybudget360.com/manufacturing-jobs-share-of-economy-bartenders-and-waiter-jobs-growing/
Alternate Unemployment Charts
http://www.shadowstats.com/alternate_data/unemployment-charts
marmico on Sun, 6th Mar 2016 4:06 pm
Doom porn aggregators are the epitome of stasis. Digits are becoming more important than atoms in the U.S. economy, as is reflected in the employment data.
https://research.stlouisfed.org/fred2/graph/?g=3HOX
The level of Professional and Business Services (Health Care) employment surpassed Manufacturing in 2001 (2008).
onlooker on Sun, 6th Mar 2016 4:33 pm
I suppose Marmico you can make food, water and energy out of digits haha.
makati1 on Sun, 6th Mar 2016 6:44 pm
Marm is just in deep denial, along with Outcast and a few others here.
marmico on Mon, 7th Mar 2016 5:24 am
Makati is traversing the Phillipines far and wide, barefoot, shovel on shoulder, searching for the buried Imelda Marcos cache of footwear. What a retard.
Hourly wages of rank and file.
https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=3HVI
Bring back the days when 98% of the labor force worked in agriculture.
Kenz300 on Wed, 9th Mar 2016 10:02 am
Exxon’s Climate Change Cover-Up Is ‘Unparalleled Evil,’ Says Activist
http://www.huffingtonpost.com/entry/exxon-evil-bill-mckibben_561e7362e4b028dd7ea5f45f?utm_hp_ref=green&ir=Green§ion=green
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