Everyone in Houston, the energy capital of the U.S., is talking about declining oil prices. While most of the country is probably smiling as they fill their gas tanks these days, Houstonians have always had a love-hate relationship with declining gas prices. Sure, $50 to fill my V-8 engine with premium unleaded feels like a 50% off clearance sale that makes me wish my tank held more of this incredibly cheap gasoline, but there's always the lingering question of how Houston's economy will withstand cheap oil this time around. Big Oil players have announced cut-backs and are delaying projects, and service companies are following suit. However, coupled with the severe housing shortage in Houston and the overall affordability of housing compared to the rest of the country and the world, the sharp decline in oil prices since last summer has done little to affect the Houston housing market thus far. I've run several analyses on my own, and the only effects I see are: (1) Days on Market averages are getting a bit longer and (2) Sales:List Price ratios are decreasing slightly. These are changes I would have expected for 2015 even without the declining oil prices, however, since they are in line with anticipated market stabilization after three consecutive years of a hot, hotter, hottest real estate market. The word from the playing field is that competition is still stiff for buyers, and sellers still have leverage power in the fast-approaching 2015 Spring market. Prospective sellers holding out for the peak of the market, however, should seriously consider taking the plunge this year. I'm not an economist, but I predict middle-market properties will be most affected by the stabilization (N.B. Stabilization does not mean price reductions or losses), while higher end properties over $1 Million and well-priced properties under $500,000 should still be grabbed up quickly this year. Furthermore, there is no question that the decline in oil prices will have some noticeable effect on the Houston real estate market eventually. But that's just my big-picture opinion.
Here's some info from an expert on the matter. According to Trulia's chief economist, Jed Kolko, history shows that it takes 18-24 months before a decline in oil prices shows its true effects (click on map above for a link to Jed Kolko's full report). In Houston's current situation, this makes sense. We still have a lot of buyers looking for homes. Less than 6% of Houston's jobs in 2012 were directly oil-related. Though I believe the percentage is higher today, and though job cuts are scary period, they will only be affecting a small percentage of a small percentage of Houstonians. Not to sound calloused towards those who are directly affected. Houston loves Energy and we all want to see it thrive. But for those sitting on the sidelines concerned that the housing market in Houston is going to take a big plunge, you are likely to miss out on some great opportunities in 2015.