What am I missing? Is Houston Real Estate Market really slowing down? (Spring: apartment, rental)

[chris_ut]

Originally Posted by Jack Lance

Oil prices have been dropping since late June



Maybe there is other economic activity helping to drive the hot housing market in Houston.

Oil Price: Latest Price & Chart for Crude Oil - NASDAQ.com

It did peak in June but the change from June to October was a $10 drop over five months versus a $20 drop in the last month. Ups and downs over $90 don't effect much but at $80 and then at $70 numerous prospects start to become uneconomic to drill.

[SouthernBoy205]

Once or if cheryjohns adds her 2 cents, then we can close this thread.

[Jack Lance]

Originally Posted by chris_ut

It did peak in June but the change from June to October was a $10 drop over five months versus a $20 drop in the last month. Ups and downs over $90 don't effect much but at $80 and then at $70 numerous prospects start to become uneconomic to drill.

They knew the Saudis were trying to drive the price down to preserve market share and inhibit the US oil Shale boom since the summer, this is nothing new. Obviously they would prefer $100 oil but they can survive and even thrive with prices a lot lower than what many people would think. If you look back in 2010 prices were even lower than they are today and people were talking about the return of prosperity and how quickly Houston recovered from the " Great recession" remember?

Don't get me wrong there will be some pain especially for the late comers who based their business model on higher priced oil, but that is what the business cycle is about, cleansing the market from time to time to improve efficiency.

David J. Lesar of Halliburton was on CNBC talking about doing fine at $65 oil

"Halliburton's customers are reviewing their drilling budgets now, but even if oil fell to $65 a barrel, it would only have a marginal impact, he said. "

Halliburton needed to be bigger, stronger: CEO

On top of all this why do you assume that there are no other economic factors driving Houston's housing market besides oil ?

[chris_ut]

Its in Halliburtons interest to say that and try to keep their stock price up since they are a service company but anyone with a clue knows they are about to take a revenue hit. The rig count will tell the tale but it takes time to get rigs off so there is a lag, we will see how things look in Q1.

[tstone]

Originally Posted by chris_ut

It did peak in June but the change from June to October was a $10 drop over five months versus a $20 drop in the last month...

So in other words, it went down 30% in a year. That drop is downright massive, only bettered by the Great Recession in recent times. It also explains why layoffs keep coming.

It's also no small wonder the certain neighborhood boosters in here who were boosting last year are all of the sudden silent... or have resorted to crabs in a bucket in a few cases.

[Jack Lance]

Originally Posted by chris_ut

Its in Halliburtons interest to say that and try to keep their stock price up since they are a service company but anyone with a clue knows they are about to take a revenue hit. The rig count will tell the tale but it takes time to get rigs off so there is a lag, we will see how things look in Q1.

I've heard it said that the remedy for low prices are low prices, and conversely the remedy for high prices is high prices, meaning high prices destroy demand and low prices stimulate demand. Yes the rig count will go down and when supplies tighten and prices go back up the rig counts will return. But you have yet to address the simple question of why you think the local real estate market is solely dependent on oil prices ? If this recession in oil prices does not cause a slump in home sales by Q1 will you surmise that Houston's economy may just be more diversified than you give it credit for.

[hendersj31]

Jack, I will make an attempt to somewhat answer your question. I do believe that the Houston economy is more diverse than just O&G, I am not disagreeing with you on that.
However, budget cuts are already happening and even though some companies can profit at $65 dollars a barrel they are still going to be cutting back and reducing costs. I have already cancelled projects and purchases with several vendors. These vendors do not operate in just Oil and Gas. The reduced spending has the potential to touch so many other industries. Personally I do believe that the low oil prices will affect real estate at some point. I will not attempt to quantify how much impact but I really do not see how it won't.

[Jack Lance]

There is an article in todays Chronicle by Erin Mulvaney which quotes Bill Gilmer who is director of regional forecasting at the U of H. He believes the single family housing market will remain strong while he thinks that multi-family housing will cool, which means single family housing should continue to appreciate while rents will likely stabilize if not actually fall. In many ways this sounds like the best of both worlds in that people will not go underwater in their mortgages and the fast rise in the cost of renting in Houston will subside. There are silver linings in this retreat of oil. Refiners are benefitting which is a sizable portion of Houston's economy and the pipeline companies make money no matter what. Consumer spending should increase which is of course a big part of any economy and the Port of Houston is in a prime position for increased economic activity.

There is no reason for a gloom and doom mentality to descend on Houston's real estate market. Obviously the market would be hotter at $100 a barrel, nobody doubts that. Even when the boom was at its peak, people knew that it would not go on forever, and that time is here, but the local real estate market will remain in good shape, in comparison to the national norm, for quite some time.

[chris_ut]

Prices will go back up, its just a matter of how long the downturn lasts. Its not like E&Ps are going to lay off 80% of their workforce over this but they may layoff 5% and service companies may lay off 20% and that will have an effect.

[bayou_boy]

Something I found while reading my daily news sites...

Falling oil prices cloud the forecast for Houston economy - Houston Chronicle

Oil price forecasts cut, to stay subdued in 2015: Reuters poll | Reuters

Fuel Fix » Study: Houston economy can withstand low oil prices

Only time will tell...