Although millions of people enjoy spending less at the gas pump, depressed oil prices are negatively impacting some US housing markets. While the impact is felt everywhere, some states are being hit harder than others. For instance, in cities with a shrinking oil industry like Texas and Oklahoma, home values are severely impacted.
For the first time in 12 years, oil is averaging $30 per barrel. In December 2014, the United States had 1,882 active oil rigs, whereas at the same time last year, rig count in Texas alone dropped a whopping 62 percent down to just 714 oil rigs. For Texas, six specific housing markets are taking this the hardest, including Abilene, Killeen, Houston, El Paso, Midland, and McAllen.
Of the six hardest-hit markets in Texas, Midland is the worst off. From 2014 to 2015, several things have happened. For instance, the number of active homes listed jumped to 885 from 399. In addition, the months of remaining inventory went from a hot 3.4 to a balanced market of 7.65. There was also a change of sold days on the market, going from 58 to 70. As for foreclosures, Midland saw an increase of more than 40 percent.
Even worse, there is poorly diversified industry base in Midland, Texas. Currently, 25 percent of male workers are involved with quarrying, oil, mining, and gas extraction. Unfortunately, there is no real diversified industry base to help lessen the impact of the downturn in oil pricing.
Houston is also being negatively impacted by depressed oil prices. Although sales and days on the market have remained much the same, active homes on the market from 2014 to 2015 increased 47 percent. Another increase was for active days on the market and MRI, which reported as 46 percent and 24 percent, respectively. Each closed oil rig means a layoff of workers, not just for the oil industry but also in retail, manufacturing, restaurants, and various other industries.
Outside of Texas, several other cities and states are struggling because of depressed oil prices. Those that are faring relatively well include Idaho, California, Washington state, and Oregon, among others. However, some states are not doing as well. Along with different areas of Texas, depressed oil prices are starting to create major challenges in Michigan, New Jersey, and North Carolina.
For instance, because of financial issues, Atlantic City is now facing a state takeover, which is having a serious impact on the real estate market. In 2015, the casino industry in this city dropped to $2.6 billion—50 percent lower than 2006. Although the value of property peaked in 2006, experts do not forecast a rebound for at least five years.
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