Home Prices Hit Highs in 2014, But Will Oil Prices Bring Down The Building Boom?

Oil prices may or may not influence home values and sales in Dallas, but Houston and the Permian Basin may feel the effects of the dropping price per barrel.

It seems like economists can’t make heads or tails of the dropping oil prices, other than it’s good for consumers. I filled my little hybrid up the other day for less than $30, so I’m going to call it an obvious win in that column. But with the high demand and limited supply of housing in the Permian Basin, and how Houston home values have skyrocketed, we’re left wondering if these two Texas regions will bear the brunt of cheap oil.

“Oil prices are certainly something to keep an eye on,” said Metrostudy’s David Brown in this DMN report. “As long as oil prices do not continue to decline and don’t stay at a level below $55 a barrel for a sustained period, we should continue to see solid demand for housing in the region.”

On the other hand, Trulia’s Jed Kolko says the impact on home values is coming, but it won’t be felt immediately.

“Oil prices won’t tank home prices immediately,” Kolko said in this AP report. “Rather, falling oil prices in the second half of 2014 might not have their biggest impact on home prices until late 2015 or in 2016.”

Prices climbed 13.4 percent in Houston, where 5.6 percent of all jobs are in oil-related industries. The city is headquarters to energy heavyweights such as Phillips 66, Halliburton and Marathon Oil. Asking prices surged 10.2 percent in Fort Worth, Texas, and 10.1 percent in Tulsa, Oklahoma. In some smaller markets, oil is overwhelmingly dominant — responsible for more than 30 percent of the jobs in Midland, Texas, for instance.

You remember, of course, that Fitch Ratings thinks that we’re all but doomed here in Texas, considering the state’s economy is somewhat dependant on the growth of the energy sector.

One concern is the recent drop in oil prices, long a primary economic driver of the Texas economy. A strong energy sector has propelled recent economic strength. However, a five-year rebound in oil prices has collapsed of late. Falling by more than a 40%, prices are now in the mid-50s as of this week. That said, ‘Texas has an economic resiliency beyond energy that will help offset any significant downward movement in home prices for these markets over the next year,’ said Hilts.

Still, with the kind of growth Texas real estate had in 2014 — more than 90,000 total sales in Dallas-Fort Worth for the year having a median sales price of around $190,000  — it’s altogether possible that whatever upset falling oil prices might deal our state, the impact will be buffered by investment in infrastructure and pricey rents.

Of course, this all depends on whether oil producers will cut output to stabilize the volatile price per barrel, which dropped to $47.20, a six-year low, according to this story.

What’s your outlook?