Oil prices are hovering around $30 per barrel, down from more than $100 per barrel in July 2014, and are expected to remain low for the rest of the year. The sharp decline has affected world economies and, closer to home, the American stock market.
Will the decline have an impact on the housing marketing, though?
That depends on where you live and how far down the road you’re looking for your next home.
Populations surged in small towns like Williston, North Dakota, a few years ago during the oil boom. There was such a demand for housing there that workers were forced to live in tents and converted shipping containers, and those that were lucky enough to find new housing paid more in rent than residents in San Francisco and Manhattan, according to an article in Forbes.
Now that the “gold rush” is drying up and the price of oil is taking a nose dive, there isn’t the same demand to rent or own property. Communities like Williston will feel the impact the most.
Larger markets where there are a high concentration of energy sector jobs could also experience some fallout from the drop in oil prices. Trulia Chief Economist Jed Kolko recently looked at the historical relationship between oil and home prices and found that “plummeting oil prices in the 1980s were followed by declines in employment and home prices in Houston, Oklahoma City, Tulsa, New Orleans, and other nearby markets.”
While there is a correlation between the decline in oil prices and in home prices, he points out that it usually takes up to two years to see a decline in home prices in these markets.
Again, the decline will be regional. Kolko indicates that the areas listed below, ranked by the percentage of jobs tied to oil-related industries, are most at risk for a decline in their real estate values:
Baton Rouge, LA
Oklahoma City, OK
New Orleans, LA
Fort Worth, TX
Since the Phoenix area, including Scottsdale, does not have many oil-related industries, falling oil prices alone shouldn’t have much of an impact on the local housing market. In fact, Kolko reports that cheap oil could actually lead to higher home prices in areas like ours because it lowers the cost of living.
Even in those areas where oil prices do matter, that impact may be as far away as two years from now.
The bottom line is that real estate in Scottsdale is poised to see positive growth, and we’re here to help you dissect the latest news as it comes in.