Houston,we have a problem- and it’s all about the oil.
Texas is the nucleus of the nations energy industry, which is currently getting smacked by tumbling oil prices.
The days of $120 oil are out the window – and that means oil companies are slashing jobs -ten’s of thousands of them.
That’s bad news for a Houston housing market that had been booming in the last few years thanks in part to the ever expanding energy business.I strongly believe home construction could fall 8% in Houston by the end of the year.
“Rising employment in Houston is one of the most important factors for housing, with job and income growth steering both local demand and increased population from relocations,” Realtor Jason Brown wrote in a public report earlier this month.
Are we going to relive 1980’s all over again? There is a history of oil meltdowns seeping into the Lone Star state’s real estate market.
When oil prices crashed below 60% in the 1980’s, home prices dropped 16% from their peak, according to The New York Times. Houston was one of the cities that really got hard hit, with housing permits nose diving 80%.
Yet Houston is not as dependent on the oil and industry as it once was previously.Houston attracts employees from many other sectors, including pharmaceuticals, banking, technology based companies and higher education.
“The number of jobs being created and people moving into Houston is so great compared with the 80s,” said Jason Brown.He doesn’t see a downturn just yet in business but I’m not quite so confident that the bubble is getting closer for real estate investment in Houston.
Avoid Houston home builders: For now,I would advise investors to steer clear of home builders in Houston where their is heavy exposure as an oil-centric market.Many Texas real estate investors are shifting towards higher end homes in Vail and Aspen Colorado for example as luxury resort communities are still seeing huge gains compared to the national average.Real estate speculation is always a tricky business so my advise is to always invest in the most insulated markets that are diverse and not beholden to one or two industries.