How Oil Prices Could Affect Houston Home Values
Houston is known as the Energy Capital of the World. This title, however, can be misleading since “energy” essentially equates to oil and gas. Where goes oil, so goes the glimmering metropolis on the bayou. Houston, however, is a far cry from the rough-and-tumble boomtown of the 70’s that crashed so spectacularly in the 80’s when a mind-blowing 87 percent of all base-employment jobs were tied to the oil and gas industry. Nowadays, we are diversified. And while a disaster like the crisis that befell the city in the 80’s isn’t likely to happen again this time around or anytime soon, that doesn’t mean low oil prices won’t have some measurable impact on the housing market.
How Oil Prices Could Potentially Affect Home Values
- Arch Mortgage Insurance Company recently mentioned Houston as a city at a potential risk for a decline in home values. Though low, there is a 36 percent chance of a decline in Houston home values according to the report.
- The State of Texas as whole is expected to face some adjustment in home values in the face of a seven-year low in crude oil prices. Arch Mortgage Insurance Company has predicted a 33 percent chance of a decline in home values statewide. This makes sense when you consider the double-digit growth in home values the last four-plus years in most of the major metropolis areas in Texas.
- As of the beginning of this year, single-family homes are down 7.5 percent from a high in June of 2015. We can expect this trend to continue if oil prices continue to remain low. Houston, as well as the state of Texas, has shown some resilience due to its growing population and prospects of jobs.
- The high-end luxury home market has experienced some price adjustments as prices have declined by 5 percent compared to last year. More tellingly, the total number of sales of Houston’s high-end homes has continued to decrease.
While not anywhere near as bad as the oil bust of the 1980’s, the recent slump in oil prices will possibly lead to a decrease in home values citywide as demand slackens and the job market takes a hit. This decline, of course, will vary from one part of the city to the next, depending on location and other market factors such as the continued growth of the Houston Medical Center and the booming ship channel.
What should we expect in Houston home values?
Despite hitting all-time highs in 2015, Houston home values are expected to stay the same or experience some decline in the face of global uncertainty in the oil markets.