Real Estate News by Big State Home Buyers

The Bad Side of Plummeting Oil Prices for Houston Economy and Real Estate

They say that the mirror has two faces, there are two sides to every coin and, perhaps the truest of all – what goes up must come down. This is especially true for oil prices and the clamor for real estate in the Houston markets. Declining oil prices has an impact on our market – some good and some bad. At Big State Home Buyers we use our knowledge of current events, exposure to expert opinions and expertise on residential real estate to predict some likely scenarios we’ll see as a result in fluctuating gas prices.

Potential Negatives of Low Gas Prices

To begin with, there will be immediate job loss because oil companies promptly lay people off and stop wells drilling in Texas when prices drop. Shale operations have already had a huge impact on US employment. Fewer jobs also mean less relocation to Houston, which has a direct effect on Houston real estate activity. Schlumberger and its oil field services rival, Baker Hughes, announced earlier this year a combined 16,000 in job layoffs. Karr Ingham, an economist who compiles a monthly index tracking oil industry activity, has projected that Texas alone could lose 50,000 upstream oil and gas jobs. (Source).

Additionally, the low oil prices will affect other industries such as real estate. It’s been a seller’s market in real estate here in Houston for some time now. Demand has outpaced supply in residential housing, but as oil prices plunged other sectors of Houston’s economy are impacted. Trulia states, however, that is usually takes two years for changing oil prices to have a significant impact on real estate. Brian Spitz, President of Big State Home Buyers, predicts that it will be closer to nine months before we see some of the smaller effects. Low oil prices and a slower economy could leave fewer new buyers in the market place. Without a surplus of buyer there are fewer real estate investors willing to venture into the “house-flipping” business. In turn the investors who remain active in the marketplace will be hold out and wait for prices to drop before acquiring new investments.

Benefits of Low Gas Prices

While lower gas prices have some negative impacts on the Houston markets, there are positive effects in the national market as a whole.

When people save money at the pump, they tend to spend it elsewhere. NY Times stated “Painful as this may be for wildcatters in North Dakota and Texas — as well as oil companies in Siberia, Latin America and the Persian Gulf — it’s an immediate boon for hard-pressed American consumers: We’ve got more money to spend, and, based on history, we’ll spend it.”

CBS News reported that that while 74% of people in their poll planned to pay bills or save the extra money, 26% of people planned to spend more on Christmas gifts. While 26% is not the majority, it is a huge percentage of people putting s LOT of money into different areas of the economy., There are other areas of the economy that are highly profitable besides real estate and oil, and the auto industry is just one area that will profit and create jobs while gas is lower.

What This Means to Home Sellers

The 2015 market could be unpredictable, mostly in the 3rd and 4th quarters of the year. We’ve seen exciting, enthusiastic appreciation in the real estate market in 2013 and 2014, and sellers have been enjoying high competition and increasingly high sales prices. But, it might cease to be a seller’s market in 2015.  If you have been thinking about selling your house, or waiting for your house to reach it’s maximum value, then now is the time to sell. Stop thinking about it and give us a call so that we can make you the highest offer possible and sell that house!

What This Means to Real Estate Investors

Keep your eyes open! The market is shifting, and it will be hard to predict when and exactly how much. In the next few months, consider being increasingly conservative in your offers. If you invest at too high a price and can’t find a buyer, you might get into trouble.

So, what do you think about the low gas prices? How do you plan to adjust your personal strategy? Leave your comments on Facebook and let us know!