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Diverse Industry Key to Home Price Stabilization in Oil-Producing Metros

Industry diversification may be the key to maintaining stable home prices in oil-producing states, according to Pro Teck Valuation Services’ Home Value Forecast (HVF). HVF research on the impact of lower oil prices on home values found that in areas where the industries are diversified beyond oil and gas, home prices have remained stable.

Authors of this research analyzed Houston’s home prices versus crude oil prices over the last forty years and found with the exception of the 1980s, Houston home prices have been steadily increasing due to diversity in the region.

“The 1980s’ decline in crude prices had a direct and significant impact on home prices in Houston. At that time, Houston’s economy was overly dependent on the energy sector,” said Tom O’Grady, CEO of Pro Teck Valuation Services. “Diversification in the industrial-base has left Houston better equipped to meet the challenges of a prolonged downturn in oil prices.”

In early February, crude oil prices hit a 52-week low around $44 per barrel, capping off a decline from a 52-week high of about $100 in mid-2014. While prices had bounced back somewhat to $50 as of mid-February, the massive decline in oil prices has already begun to reverberate throughout the economy. Many analysts have expressed opinions on how low oil prices would affect home prices. In February, Arch Mortgage Insurance Company released a report that showed an increased risk of lowering home prices in oil-producing states.

This month’s HVF update includes a listing of the 10 best and 10 worst performing metros as ranked by its market condition ranking model. The rankings are run for the single-family home markets in the top 200 Core Based Statistical Areas (CBSA) on a monthly basis. They highlight the best and worst metros with regard to a number of leading real estate market indicators including, sales/listing activity and prices, months of remaining inventory (MRI), days on market (DOM), sold-to-list price ratio and foreclosure percentage, and REO activity.

“In addition to the Texas and Colorado markets, California and Washington state metros are again in the HVF top ten this month,” O’Grady said. “The California and Washington markets all have higher sold prices over active home prices, with San Francisco leading the pack with average sold price of $989,000 over $878,000 active sales price. All of the top ten have had significant drops in active listings and MRI and look like they will be seller’s markets going into the spring.”

February’s top CBSAs include:

Bellingham, Washington

Seattle-Bellevue-Everett, Washington

San Antonio-New Braunfels, Texas

Denver-Aurora-Lakewood, Colorado

Oakland-Hayward-Berkeley, California

San Diego-Carlsbad, CA

San Francisco-Redwood City-South San Francisco, California

Santa Rosa, California

College Station-Bryan, Texas

Houston-The Woodlands-Sugar Land, Texas

“The bottom ten are still plagued by the downward pressure of foreclosure sales,” O’Grady said. “In addition, MRI fluctuates between 6 and 13 months for the bottom ten, which is much less than during the height of the housing crisis but far greater than the 2 – 3 that is the majority in the top ten.”

The bottom CBSAs for February were:

Tampa-St. Petersburg-Clearwater, Florida

Orlando-Kissimmee-Sanford, Florida

Akron, Ohio

Cleveland-Elyria, Ohio

Jackson, Michigan

Jacksonville, North Carolina

Hagerstown-Martinsburg, Maryland – West Virginia

Pensacola-Ferry Pass-Brent, Florida

Rockford, Illinois

Youngstown-Warren-Boardman, Ohio - Pennsylvania

Gary, Indiana

 

About Author: Samantha Guzman

Samantha Guzman is an award-winning visual journalist and graduate of the University of North Texas Mayborn School of Journalism. She specializes in visual storytelling and has skills in video, audio and photography, in addition to news writing. She has traveled to Mexico and Bosnia as an assistant for multiple multimedia projects and taught news writing, photojournalism, and narrative storytelling in the past.
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