Home Values in U.S. Oil States to Fall With Drop in Crude Prices

by MPA28 Aug 2015
By Kathleen M. Howley

(Bloomberg) -- Oil-producing states defied the U.S. housing crash by posting gains in home values as the rest of the nation suffered. Now, with crude trading at half what it was a year ago, it may be their turn for lower property prices.

New Mexico, Oklahoma, Alaska, Wyoming and North Dakota may see home-price declines of 6 percent to 20 percent over the next five years, according to one of the models in a Fannie Mae report issued Friday. Under the worst-case scenario offered by Eric Brescia, a Fannie Mae economist, home values in Texas will be flat in the next five years if lower energy prices cut demand for shale oil.

“This is going to hurt, but we won’t see a repeat of the 1980s when Texas was awash in vacant houses,” said Mark Zandi, chief economist for Moody’s Analytics Inc. in West Chester, Pennsylvania. “Going into this, most of the oil states were vastly under-supplied with housing. That’s going to cushion the blow.”

Lower oil prices have benefited most Americans by putting extra cash in their pockets -- about $700 a year per household, according to a government estimate. Those in the oil industry are in a more precarious situation. Nationally, the energy sector probably will lose 150,000 jobs from January 2015 through March 2016, with another 150,000 positions lost in related industries such as pipe manufacturing, according to Zandi.

The worst-hit area will be Houston, where about 75,000 jobs are likely to be eliminated, he said.

“Lower oil prices are a net positive for the U.S. economy and for most of the nation’s housing markets,” Zandi said. “The pain is going to be concentrated.”


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