Borrowers like to see low prices at the gasoline stations. But there are problems with low gas prices, especially if you make your living in the oil business. Pro Teck Valuation Services’ Home Value Forecast examined the impact domestic oil prices are having on the nation’s housing market, particularly in areas like Texas where a shrinking oil industry is impacting home values.
Sure, many of us are enjoying the benefits of oil below $30 per barrel, but the impact on the U.S. oil industry has been alarming. At the end of December 2014, there were 1,882 active oil rigs in the United States. One year later, there were 714. By 2015 in Texas, the rig count dropped by more than 62 percent. Six of the bottom ten real estate markets are located in Texas—namely, Abilene, El Paso, Houston, Killeen, McAllen, and Midland.
Many of JMAC’s brokers are in areas where there are oil wells, including Southern California. Thankfully, those areas mostly have varied economies, so the impact of oil price declines are somewhat muted. We’re not as bad as, say, Midland Texas where active homes on the market rose from 399 to 885 since last year. Foreclosures have increased by more than 40 percent since this time last year. Twenty-five percent of men in Midland work in mining, quarrying and oil and gas extraction, not exactly the diversified industry base needed to lessen the impact of the oil downturn. Houston has also dropped in ranking, although not as severely.
Fortunately for JMAC and our brokers, most of our lending markets have very diversified economies. As has been the trend, Washington, Oregon, Idaho and California continue to lead much of the nation in stability and economic well-being. Oil Prices: Good at the Pump, Not so Good for the Economy