The Impact of Oil, Gas on the US Housing Market


Courtesy of Rigzone interviews Michele Marano on the impact of Oil on Houston Housing

Just a few years ago, the industry was in an upcycle – oil prices were high, drillers had discovered new ways to extract oil and gas and jobs were plentiful in the oilfield. Workers flocked to oil-rich cities like Houston; Midland, Texas; and Williston, North Dakota. The housing markets in these areas saw a heavy increase in home sales. But these days, sales have slowed down quite a bit.

“We are not excelling anymore. We are maintaining,” Warren Ivey, managing broker and owner of Century 21 The Edge and regional vice president of the Texas Association of Realtors, told Rigzone. “While we’re not seeing a tremendous increase in prices on a monthly basis, we’re holding our own. The median price of a home last quarter (4Q 2015) was up by 0.3 percent.”

Ivey, who has worked in the Midland market for 10 years, said a balanced market should have 6-6.5 months of inventory. Currently, the Midland market has 3.5 months of inventory.

“A year ago, we had 2.4 months of inventory, so [sellers] were doing better then,” said Ivey. “Sellers are aware that we sold their properties within 17 days on the market last year. Now the average number of days on the market is 52. Our sellers aren’t panicking, but they’re asking what’s wrong?”

The significant decline in drilling activity in the Permian Basin plays a factor. The single family residential renting market in Midland has also been affected, noted Ivey.

“Prices have gone down and inventory has gone up,” he said.

Ivey believes this is due to many of the migratory workers – guys who were living in Midland and working on the drilling rigs.

“The people it took to operate those units were a migratory workforce. We saw a lot of them come in from places like El Paso, where the husband came and left the mother and children at home,” said Ivey. “When the overtime stopped and drilling activity slowed down, those workers probably went back home. They aren’t going to be re-leasing their homes.”

 

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