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Home Value Forecast: Oil Prices and the Impact on Texas Housing

Many of us are enjoying the benefits of oil at its lowest price in over 12 years, in the $30 a barrel range as of this release. The impact on the U.S. oil industry, however, has been alarming.

At the end of December, 2014 there were 1,882 active oil rigs in the United States, one year later there are 714. With each closing there are workers laid off – not only in the oil industry but in manufacturing, restaurants, stores and other industries that service the market.

In Texas, the rig count dropped by more than 62% in 2015. Karr Ingham, an economist at the Texas Alliance of Energy Producers, predicted oil industry job losses in Texas would be over 60,000 by the end of 2015, and that prediction was made before the price of oil fell again on the news that OPEC was not cutting back on production.

In the April, 2015 Home Value Forecast we looked at the impact falling oil prices were having on Texas communities – oil at that time was $55 a barrel. This month, six of Home Value Forecast’s bottom 10 real estate markets are in Texas: Abilene, El Paso, Houston, Killeen, McAllen, and the hardest hit of them all by the downturn – Midland.

In the April report, we stressed how Texas has diversified its industry base since the oil decline in the 1980s’ – helping to lessen the impact of an oil downturn. Proof of that is that The Federal Reserve Bank in Dallas forecasts 1.4% job growth in Texas for 2016, predicated on oil getting back to the $40 to $50 range. If it stays or falls from where it is now, Texas could experience its first negative job growth since 2009.

Now let’s look at Midland today and one year ago:

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In Midland, 25% of men work in the mining, quarrying, and oil and gas extraction – not exactly the diversified industry base needed to lesson the impact of the oil downturn. Midlands real estate market is showing many concerning signs, including:

  • Active homes on the market rose from 399 to 885.
  • Months of remaining inventory (MRI) has gone from 3.4, a “hot” sellers market to 7.65, a “balanced” market. While 7.65 MRI is not bad, the speed of the shift is troubling.
  • Sold Days on Market (58 to 70) and Active Days on Market (56 to 96) have both increased dramatically
  • Foreclosures as a percent of sales, while still under 5%, have increased by more than 40% since this time last year. If trends continue and oil prices stay low, we anticipate this will continue to go up.

Another community that dropped from “strong” to “soft” in HVF ranking is Houston. Because of its more diversified economic base, the impact has not been as dramatic:

  • Sales and Days on Market have stayed relatively consistent.
  • There has been a 47% increase in Active homes on the market from a year ago.
  • Active Days on Market and MRI have both increased, 46% and 24% respectively since this time last year. These are the signs that the market is slowing down.

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We’ve updated the below graph from our April HVF release and will keep an eye on the coming changes.

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CBSA Winners and Losers

Each month, Home Value Forecast uses a number of leading real estate market-based indicators to rank the single-family home markets in the top 200 CBSAs and highlight the strongest and weakest metros.

The ranking system is purely objective and is based on directional trends. Each indicator is given a score based on whether the trend is positive, negative or neutral for that series. For example, a declining trend in active listings would be positive, as will be an increasing trend in average price. A composite score for each CBSA is calculated by summing the directional scores of each of its indicators. From the universe of the top 200 CBSAs, we highlight each month the CBSAs which have the highest and lowest composite scores.

The tables below show the individual market indicators that are being used to rank the CBSAs, along with the most recent values and the percent changes. We have color-coded each of the indicators to help visualize whether it is moving in a positive (green) or negative (red) direction.

Top 10 CBSAs:

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As has been the trend, CBSAs in Washington, Oregon, Idaho and California continue to lead HVF’s Top Ten. New this month are two Utah CBSAs, Ogden and Salt Lake, both showing very healthy markets with homes selling fast and active prices on the rise.

Bottom 10 CBSAs:

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The four non-Texas communities have all been in our bottom ten before. Atlantic City is facing state takeover because of financial issues – impacting the real estate market.

Revenues for the casino industry in Atlantic City fell by 6.5% in 2015 to $2.6 billion – half of what they took in during 2006. Property values peaked then too, and a rebound is not forecasted in the next five years, according to the Collateral Analytics Home Price Forecast for the CBSA.

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About Home Value Forecast

Home Value Forecast (HVF) is brought to you by Pro Teck Valuation Services. HVF provides insight into the current and future state of the U.S. housing market, and delivers 14 market snapshot graphs from the top 30 CBSAs.

HVF is built using numerous housing and economic data sources. The top 750 CBSAs as well as data down to the ZIP code level for approximately 18,000 ZIPs are available with a corporate subscription to the service.

Also, Pro Teck Valuation Services offers reporters the following:

  • National, regional or metro level housing data
  • Monthly Updates and HVF Insights articles
  • By-request data for your story — custom data, heat maps and charts are available
  • Expert commentary from Home Value Forecast Editorial Committee:
    • Tom O’Grady, Chief Executive Officer, Pro Teck Valuation Services
    • Michael Sklarz, PH.D., President, Collateral Analytics
    • Jeff Dickstein, Chief Compliance Officer, Pro Teck Valuation Services
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