H OUSING N EWS R EPORT
February 2016
referring to the Organization of the Petroleum Exporting Countries (OPEC)’s landmark decision not to cut oil production, leaving 30 million barrels per day unchanged. The oil cartel’s goal was to bring oil prices down, in order to make the extraction of shale oil in Texas less affordable. Dotzour said the Texas economy is more diversified today, compared to the last oil slumps of the mid-1980s and 2008. As of 2013, oil and gas accounted for only 13 percent of the income generated in the state, and only 2.5 percent of the jobs, according to a 2015 Federal Reserve Bank of Dallas report. Last year, Texas real gross domestic product grew by 5.2 percent, more than any American state beside North Dakota and more than double the growth rate of the United States overall, according to the Texas Comptroller. But fluctuations in global oil prices are weighing heavily on West Texas cities like Odessa, where median homes prices are down 3.5 percent in the fourth quarter of 2015, accoring to Texas Association of Realtors. In Odessa, sales were down 25 percent in the fourth quarter of 2015. The drop in oil prices is starting to be reflected in the local real estate market. In December, the Midland unemployment rate stood at 3.3 percent, up from 2.2 percent a year earlier, followed by Odessa at 4.6 percent, up from 2.8 percent in December 2014, according the Bureau of Labor Statistics. The Permian Basin housing market is beginning to reflect the weakness of the labor market, according to the Dallas Federal Reserve. “The Permian Basin economy continued to weaken in the fourth quarter as West Texas Intermediate crude oil prices fell over 20 percent. The drop in drilling activity has led to job cuts, moving the unemployment rate higher. The sluggish job market continues to dampen both regional retail sales and the housing market,” reports the Dallas Fed. “The housing market in the Permian Basin is beginning to reflect the weakness of the labor market. Although home sales rebounded to 243 in December, sales began to decline in late 2014. The December figure is down nearly 13 percent from a year earlier. In contrast, home prices have remained relatively stable over the past year. In December, the median home price totaled $225,000, up 5.7 percent from a year ago.” Oil companies in West Texas are decommissioning rigs and announcing layoffs. The gleeful mood has turned glum in West West Texas Unemployment
Texas as the frenzy of shale oil drilling has come to a halt.
In the fourth quarter of 2015, home sales have slowed, especially in Texas housing markets that are dependent on oil, such as Midland (down 22 percent), Odessa (down 25 percent) and Houston (down 8 percent), which are suffering amid a plunge in oil prices, accoring to Texas Association of Realtors.
Midland: Population Growth
The city of Midland has grown in population from 108,000 residents in 2010 to 140,000 today. It’s one of the nation’s 10 fastest-growing metropolitan areas, according to the Census Bureau. The population growth has led to an explosion of hotel and apartment construction in Midland. While some markets in Texas are slowing, statewide figures still show overall home sales accelerating and prices rising in most of the major Texas metros, accoring to Texas Association of Realtors. “The state gained 169,000 nonagricultural jobs fromDecember 2014 to December 2015, an annual growth rate of 1.4 percent, lower than the nation’s growth rate of 1.9 percent,” according to Texas A&M Real Estate Center. “The nongovernment sector added 142,800 jobs, an annual growth rate of 1.4 percent compared with 2.2 percent for the nation’s private sector.” While West Texas is struggling, North Texas is booming. The Dallas-Fort Worth metro is among the top hubs for corporate headquarters in America. In Plano, bulldozers are clearing vast lots to house the new North American headquarters for Toyota, which is moving from Southern California. Dallas-Fort Worth hosts 21 companies in the Fortune 500, including American Airlines, Exxon Mobil, J.C. Penney and high-tech giants such as Texas Instruments. “The Dallas economy is most highly correlated to the U.S. economy,” said Dotzour. “Dallas is the least impacted city to the volatility of oil and gas price fluctuations. In Dallas, the inventory levels of unsold homes is way low; it’s one-to-three months.” Ben Caballero, chief executive officer and president of HomesUSA.com in Addison, Texas, who works with 44 different new home builder brands in the four major Texas markets, Continued Next Page But Texas’ economy is slowing down. Dallas: Boomtown USA
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