Will Tumbling Oil and Stocks Impact Houston Home Prices?
Homeowners in the Houston Energy Corridor are naturally concerned about falling oil prices and a tumbling stock market. Will a fall in Houston home prices follow? For insights, we’re sharing portions of several recent articles that address the topics:
When it comes to investing in the stock market, you may lose your shirt, but you probably won’t lose your home. When the equity market gets rough, real estate tends to be a life raft for investors seeking safety.
“Real estate is Americans’ preferred investment for money that they won’t need for 10 years, and that hasn’t changed,” said Greg McBride, chief financial analyst with New York-based Bankrate.com. “Nervous investors always look to real estate in times of volatility.”
Economic Letter from the Federal Reserve Bank of Dallas:
Opinions differ about the relative roles of supply, demand and other factors in the oil price drop. An International Monetary Fund report suggests that increased supply accounts for 60% of the price plunge. The remainder is attributable to lower-than-expected demand and a November 2014 decision by OPEC to increase oil production.
Amid the oil price collapse, some fear that Texas may experience a deep recession like the one in the mid-1980s. This is unlikely. The Texas economy is more diversified today, and the energy sector is less important. For example, the statewide share of oil- and gas-related employment was 2.6% in 2014, compared with 4.7% in 1982. The oil and gas sector’s share of output peaked at 19% in the early 1980s and was 13% in 2013.
While there was a correlation between oil-price declines and home-price declines in certain cities during the 1980s, it usually takes up to two years for such a reaction to materialize. If cheap oil is here to stay, homes in markets with a high concentration of energy sector jobs may begin showing price declines sometime in late 2015 or 2016, which could mean a small decrease in Houston Home Prices.
While some of the largest oil cities with the highest risk of falling home prices are in Texas, , experts say the state’s economy is diversified enough to help soften the blow.
Gasoline prices should bottom in the next month, then begin moving higher as refineries go into maintenance season for conversion to spring fuel.
KW Energy Corridor Team:
What does it all mean for Houston homeowners and Houston Home Prices? Simply put, it’s too soon to tell for certain. A prolonged drop in oil prices and job cuts could have localized impact on home inventory and demand, causing a decline in home prices. However, this is not the 1980’s. Houston is a global city with a diverse range of industry and employment. New technology, entrepreneurship and international investment are among our city’s greatest strengths.
Cyclical peaks and valleys are a natural part of our economy. While no one has a crystal ball for the future, obtaining the expert advice of the KW Energy Corridor Team can help you find real estate success in all market conditions!
KW Energy Corridor Team
11757 Katy Fairway | Suite 930
Houston, TX 77079