The recent plunge in oil prices could cause home prices to slip in the oil-producing markets of Texas, Oklahoma, Louisiana, and elsewhere. However, it typically takes two years for oil prices to fully affect home prices in those markets. At the same time, lower oil prices could boost home values in the Northeast and Midwest, according to Trulia.
Nationwide, asking prices on for-sale homes were up 0.5% month-over-month in December — a slowdown after larger increases in September, October and November. Year-over-year, asking prices rose 7.7%, down from the 9.5% year-over-year increase in December 2013. Asking prices increased year-over-year in 97 of the 100 largest U.S. metros.
Four of the five markets where asking prices rose the most year-over-year are in the South, including Atlanta, Cape Coral-Fort Myers, North Port-Sarasota-Bradenton, and Deltona-Daytona Beach-Ormond Beach. Of the top 10, four are in the Midwest, including Cincinnati, Detroit, Lake-Kenosha Counties, and Indianapolis. Among markets with the largest asking price increases, Houston stands out for having a large local oil industry, accounting for 5.6% of jobs there.
||Where prices increased most in December
||Y-o-Y % asking price change, Dec 2014
||% of jobs in oil-related industries
||Cape Coral-Fort Myers, FL
||North Port-Sarasota-Bradenton, FL
||Deltona-Daytona Beach-Ormond Beach, FL
||Lake-Kenosha Counties, IL-WI
|Note: among 100 largest metros. Employment in oil-related industries is from County Business Patterns, 2012 (see note at end of post). To download the list of asking home price changes for the largest metros: Excel or PDF.
Only Bakersfield and Baton Rouge have an even higher employment share in oil-related industries than Houston. Oklahoma City, Tulsa, New Orleans, and Fort Worth round out the seven large metros where oil-related industries account for at least 2% of employment. It’s not until you look at smaller metros that you find oil-related industries representing a larger employment share. In Williston, ND, and Midland, TX, they account for almost 30% of local jobs.
Oil prices have plunged from over $100 a barrel in July 2014 to around $50 a barrel in early January 2015, threatening oil-producing economies around the world. Within the U.S., big oil price drops have historically been associated with job losses and falling home prices in energy-producing regions. In particular, plummeting oil prices in the 1980s were followed by declines in employment and home prices in Houston, Oklahoma City, Tulsa, New Orleans, and other nearby markets.
Trulia looked at year-over-year trends in oil prices, jobs, and home prices from 1980 to the present in the 100 largest metros and found that:
- In oil-producing markets, home prices tend to follow oil prices, but with a lag. For instance, in the 1980s, the largest year-over-year oil price declines were in early- and mid-1986. In Houston, job losses were steepest in late 1986. But home prices didn’t slide most until the third quarter of 1987. Since 1980, employment in oil-producing markets has followed oil-price movements roughly two quarters later and home prices have followed oil-price movements roughly two years later.
- While home prices and oil prices move in the same direction in oil-producing markets, they tend to move in the opposite direction in many other markets, according to Trulia. Cheaper oil lowers the costs of driving, heating a home and other activities, boosting local economies outside oil-producing regions. In the Northeast and Midwest especially, home prices tend to rise after oil prices fall.
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