Cheap Oil Hits Housing In North Dakota, Texas, & Others
Submitted by Nick Cunningham via OilPrice.com,
Low crude oil prices since the second half of 2014 have created a boon for consumers as the cost to fill up at the pump has plunged. The extra cash in the pockets of millions of motorists is often likened to an unexpected tax cut, which could help stimulate the economy.
Leaving aside the true extent of such a stimulus, which is debatable, there is a flip side to that coin. The collapse in crude oil prices is a huge blow to areas where oil extraction and associated industries are the bread and butter of the economy.
As petro-economies suffer from the bust in crude prices, the effects are showing up in the housing market.
Take North Dakota, for example, which was on the front lines of the oil boom between 2011 and 2014. In fact, North Dakota is probably the most vulnerable to a downturn in housing because of low oil prices. The economy is smaller and thus more dependent on the oil boom than other places, such as Texas. The state saw an influx of new workers over the past few years, looking for work in in the prolific Bakken Shale. A housing shortage quickly emerged, pushing up prices. With the inability to house all of the new people, rent spiked, as did hotel rates. The overflow led to a proliferation of “man camps.”
Now the boom has reversed. The state’s rig count is down to 53 as of January 13, about one-third of the level from one year ago. Drilling is quickly drying up and production is falling. "The jobs are leaving, and if an area gets depopulated, they can't take the houses with them and that's dangerous for the housing market," Ralph DeFranco, senior director of risk analytics and pricing at Arch Mortgage Insurance Company, told CNN Money.
New home sales were down by 6.3 percent in North Dakota between January and October of 2015 compared to a year earlier. Housing prices have not crashed yet, but there tends to be a bit of a lag with housing prices. JP Ackerman of HouseCanary says that it typically takes 15 to 24 months before house prices start to show the negative effects of an oil downturn.
According to Arch Mortgage, homes in North Dakota are probably 20 percent overvalued at this point. They also estimate that the state has a 46 percent chance that house prices will decline over the next two years. But that is probably understating the risk since oil prices are not expected to rebound through most of 2016. Moreover, with some permanent damage to the balance sheets of U.S. shale companies, drilling won’t spring back to life immediately upon a rebound in oil prices.
There are some other states that are also at risk of a hit to their housing markets, including Wyoming, West Virginia and Alaska. Out of those three, only Alaska is a significant oil producer, but it is in the midst of a budget crisis because of the twin threats of falling production and rock bottom prices. Alaska’s oil fields are mature, and have been in decline for years. With a massive hole blown through the state’s budget, the Governor has floated the idea of instituting an income tax, a once unthinkable idea.
The downturn in Wyoming and West Virginia has more to do with the collapse in natural gas prices, which continues to hollow out their coal industries. Coal prices have plummeted in recent years, and coal production is now at its lowest level since the Reagan administration. Shale gas production, particularly in West Virginia, partially offsets the decline, but won’t be enough to come to the state’s rescue.
Texas is another place to keep an eye on. However, Arch Mortgage says the economy there is much larger and more diversified than other states, and also better equipped to handle the downturn than it was back in the 1980s during the last oil bust.
But Texas won’t escape unscathed. The Dallas Fed says job growth will turn negative in a few months if oil prices don’t move back to $40 or $50 per barrel. Texas is expected to see an additional 161,200 jobs this year if oil prices move back up into that range. But while that could be the best-case scenario, it would still only amount to one-third of the jobs created in 2014. “The biggest risk to the forecast is if oil prices are in the range of $20 to $30 for much of the year,” Keith Phillips, Dallas Fed Senior Economist, said in a written statement. “Then I expect job growth to slip into negative territory as Houston gets hit much harder and greater problems emerge in the financial sector.”
After 41 consecutive months of increases in house prices in Houston, prices started to decline in third quarter of 2015. In Odessa, TX, near the Permian Basin, home sales declined by 10.6 percent between January and October 2015 compared to a year earlier.
Most Americans will still welcome low prices at the pump. But in the oil boom towns of yesterday, the slowdown is very much being felt.
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Perhaps they can't take their houses with them, but they can build new ones out of their FANGTasy stawk certificates.
See? Glass half full.
You know, if those houses were on wheels they could take them with. And with the price of gas being so low towing them someplace else behind their new 84-month financed Ford F350 Dually wouldn't even cost that much.
That's why they call trailers 'wheel estate'.
Houston home sales fell 10.2 percent year over year in October, according to the latest monthly report from the Houston Association of Realtors.
Single-family home sales took a nosedive in all price categories. Houston’s townhome and condominium market saw the greatest hit in sales, tumbling 17.3 percent in October.
http://www.bizjournals.com/houston/news/2015/11/11/houston-home-sales-decline-by-double-digits-amid.html
And honestly...it's not a very good city...would hate to have to live there.
Then how is Berkshire Hathaway's company reposessing so many mobile homes? Couldn't one just tow the thing off and hide it somewhere/sell it illicitly?
There will be no real recovery what so ever!
The elite will soon run and hide in the bunkers paid for with citizens taxes, after engineering a full economic collapse as well as starting WW3, plus they will make sure that there are enough Jihadi's in the West to start a race war.
That should be enough to cover up the failed fiat ponzi scheme and take care of the 'excessive' population......
http://beforeitsnews.com/global-unrest/2016/01/the-lion-is-it-time-to-fi...
http://beforeitsnews.com/ is sooooo full of shit. click bait land
Yeah, half full of hemlock.
Their are whole areas being decimated by these low oil prices. The true long term ramifications are going to come once unemployment benefits run out. IT is having a massive rippling effect on services and trades that support these industries too.
http://jimroger.blogspot.com/
Nothing lasts forever. Learn it or lose it.
Houston Commercial RE in for Big Trouble 2016
"We’ve got a huge supply issue, and demand is almost negligible at this point," Bellow said. "Demand is extremely stagnant and arguably decreasing. Landlords have to get aggressive."
Buildings that either have roughly 80 percent or less occupancy, have one of its largest tenants rolling over to 2016 and 2017, or are being built on spec are likely signing on tenants at rates that are around 30 percent lower than they were in 2015, Bellow said.
http://www.bizjournals.com/houston/morning_call/2015/12/heres-how-landlo...
And this is just the start the Saudie's are going to take out all thesmall producers. Right now the little guys are selling what oil they have left and then the small producers will collapse. Then in 2-3 years the the House of Saud will raise oil prices again.
Moral of the story: buy oil assets whilst they are C. H. E. A. P.
Don't build infrastructure at $100 and more a barrel and expect it to last forever. See bubbles are one hell of a drug, As I type crude is ripping higher 31.50 and stalling at initial balance. CL Options expiration today so surging and its fueling equities for now along with the tribes pivot man bulltard comments.
But if oil is so cheap, why am I paying a buck 80 for gas?
It's complicated.
taxes
What do you pay for a 12oz beer?
What do you pay for a 16oz bottle of water?
Well, at least Barry said, "the economy is strong."
That's something, right.
Taxes. Iowa corn farmers / Renewable Fuels standards. Low sulfur gasoline standards. Low benzene gasoline standards. Cheap Canadian crude and syncrude isolated due to Keystone XL being squashed. Warren Buffet profiteering with rail road shipments of crude oil Like a previous commenter said - it's complicated!
The hip bone is connected to the thigh bone....
. . . the thigh bone's connected to the knee bone, the knee bone's connected to the shin bone and we all did circle reach-around jerk.
Remember that movie Fun With Dick And Jane?
Don't you mean "Fun with Jane's Dick"?
Spungo: Both the '70s version AND the new version are worth watching.
Sounds like we all need a reminder...
Cheap oil is GOOD for the economy, Remember? /S/
cheap energy is the driver of a free market economy
its why "democrats" hate cheap energy
yeah well, who wants to live down there with a bunch of ignorant white trash
"yeah well, who wants to live down there with a bunch of ignorant white trash"
The illegal brown people from the south?
A shitload of carpet-bagger Yankees?
I <3 cheap gas.
Nobody cried for me when the construction industry went in the shiter.
'Nobody cried...'
Funny how that works.
Don't cry for me, Argentina.
Dakota is following Vegas' example.
Hasnt done much to the land prices on 123 yet but I'm still hopeful (and hopeful less 18 wheelers will allow them to fix the fucking roller-road-coaster).
Such is the nature of Boom/Bust. Nothing to see here; move along.
Welcome to the Boomtown, beotches:
https://www.youtube.com/watch?v=4eysGQuTm6s
I know. Houses on wheels! Take your house with you when you move.
In regards to taking ur house with you, the main problem is finding a private security box facility to transfer ur precious to.
Btw, the new style "front lounge" is a tempting buy.
http://www.trailerlife.com/camper-trailer-news/living-it-up/
"Btw, the new style "front lounge" is a tempting buy."
Holy Crap! Did you see the size of the two slides in the nose section? If the frame was built by Lippert, that's a recipe for disaster right there! The slides add way more weight than that section is designed to hold, and the large openings for them allow the whole front to flex. That's why when we went shopping for our fifth wheel we specifically looked for one without a slide up there! Without a slide in the riser section extra framing helps to stabilize the whole design and reduce (not prevent) flexing on uneven surfaces.
Thanks for the feedback. I currently have a rear lounge 5th wheel. I sure do like the front lounge concept. I'll definitely do some more research in re your comments.
GCC is rolling out a VAT tax in 2018, which implies the GCC countries think oil bust will go longer than 2 years.
http://www.reuters.com/article/gulf-tax-vat-idUSL8N14Y1Y520160114
Bahrain just raised fuel prices 55% and Oman removed their subsidies
http://www.emirates247.com/business/bahrain-hikes-petrol-price-by-56-oma...
Why don't they just raise the price to manufacture oil?
/sarc/
<- Would buy and live in <$65K mobile home if wife would allow it.
<- Does not suit my prefered lifestyle
I'd stack with the savings.
Mobile Home? What you need here is a narrative pivot. Just tell the wife it is a "Tiny Home" and all of the hipsters are doing it! Show her the hip TV shows on Tiny Houses! Acquaint her with the Tiny House book selections! Everyone has tiny desires for tiny carbon footprints and tiny budgets. To top it all off, tiny is cool!
Yes indeed sir, you could be stacking tomorrow if you just used the hipster vernacular of the 21st century! So Cool! So green! So Earth Friendly! Tiny House!
Good. Housing is insanely overvalued
Ahhh, but you see...Central Planning knows best!
To pick an example, there would be no housing crisis in ND if the City planning staff had just let the oil gypsies come and go. But no, the planners said we cannot have this eyesore upon Our Dear Community. They said there can be no long-term "temporary" housing. The citizens were presented a case of long term blight and images of trailer trash shootouts in the night. So they mandated thus that permanent cheap housing shall be the rule. And now all of those same planners will not be made to answer for their shortsighted flat out WRONG predictions, assumptions, and other false prognostications. Now they will have to craft another narrative for the citizens to address what to do with the shocking number of vacant cheap houses. And it will involve spending tax dollars to tear them down or "incentivize" ownership. Meanwhile, property taxes they sold the voters and planned on DON'T come in, local spending and sales taxes decline, and all the result of a massive fraud cooked up in central planning.
Central Planners have been educated by their stooge fascist leaders at the American Planning Association and encouraged by their socialist/Marxist/communist peers. They will spend every last dollar given the opportunity, and lie to your face as they seize private property, demand goverment intervention in the private market, and create havoc in the wake of their best intentions.