Many Buyers have expressed their opinion that home prices will be dropping soon as Houston experiences lower oil prices in 2015. It is true that fluctuations in oil prices can effect the Houston economy including residential real estate, but there are several reasons why home prices will not be dropping in Houston.
Many long time residents of Houston remember the 1980s when oil prices were high and the economy in the Bayou City was booming. Construction cranes dotted the skyline and homes could not be built fast enough (sound familiar today?). Then the crash. The late 1980s witnessed oil prices at $10 a barrel and the party was over. Several years of extreme lay offs in the Energy sector forced many to sell their homes and move away. With few buyers looking to purchase and a slow economy, many homes sat for months at a time and prices fell.
Today, we are seeing those low oil prices again…but not as low. $45 per barrel. Also we are seeing layoffs, but not as many this time around. What other factors are keeping home prices up despite lower oil prices?
For starters, the Texas state demographer’s office is predicting population growth in Houston and surround counties over the next 35 years. We are already seeing large groups of people move here from the the “rust belt” states like Illinois, Michigan and New York as well as California. In addition, large numbers of foreign families are moving to Houston from areas such as Asia, Central American and Europe. And finally in Texas large numbers from the Dallas and Austin areas are all heading to Houston. Combine all three groups…40,000 in 2013 and over 46,000 in 2014. And these numbers are expected to rise.
All of these families need a place to live. However, there is a shortage of homes to purchase in the Houston area. Unlike the 1980s when the builders had too many homes to sell, builders did not over build this time and kept inventories of new construction low. Home prices are not dropping in Houston largely for this one factor. Home construction was hit hard after the 2008 recession and they have not gotten back to numbers they were building at that time. Fast forward to 2011 and the local economy started to take off. More families moving to Houston than any other city in the country and the lack of new construction homes available for sale caused resale home prices to rise as well as rent prices.
Additional factors why home prices are not dropping in Houston include a more rounded economy for the area. Finance, medical, technology, exporting/importing (Houston ship channel) are all growing industries here. Don’t forget about Houston’s lower cost of living, good schools and nice weather all contribute to a growing population.
No one can predict what real estate prices will do in the future. But factors such as these indicate home prices, despite lower oil prices, should remain level if not rising slowly for many years to come.
For more information on home prices in Houston, please contact your Houston real estate expert Mark McNitt at 832-567-4357.