Expert Analyzes Housing Market Strength in Oil Metros

Housing market watchers have been waiting to see what will happen in parts of the U.S. with heavy oil-related employment, according to CoreLogic’s report on their Insights Blog titled “Housing Market Strength in Oil Metros, Equity Position of Texas Oil Metros is Strong.”

The blog writer and senior economist for CoreLogic, Molly Boesel noted that between the fall of 2014 and this spring, oil prices fell 42 percent causing those who consistently monitor the housing market to wonder about the effect that this will have on the real estate industry.

In April, a state-level employment report showed a month-over-month decrease in employment in Texas and Oklahoma for March 2015. Texas saw non-farm payroll employment drop by 25,400, while Oklahoma saw a drop of 12,900.

“While some states and metros may see large drops in employment related to low oil prices, it could be some time before impacts on mortgage loan performance are realized,” Boesel said. “In the interim, we can assess the health of areas that have heavy oil employment to see how their housing markets might withstand income loss.”

According to Boesel, the share of jobs related to the oil sector by metro area can be quantified with the County Business Patterns (CBP) data series which tracks the number of employees by industry. This CBP data focuses on metros that have the largest share of oil-related jobs and examines their house price performance and equity position. Midland, Texas had the highest share of oil employment at 26 percent, while Houston-The Woodlands-Sugar Land, Texas had the lowest at 5 percent.

A metro such as Midland, Texas may have a 26 percent share of employment in oil, making it one the best positioned metros to survive a large drop in prices, the report says. In contrast, Houston may not have the same fate, with a 5 percent share in oil-related employment.

“House price performance in the majority of the oil metros has been strong, with 15 of 25 metros showing a year-over-year Home Price Index (HPI) increase of more than 5 percent in March 2015, and only two metros showing a year-over-year HPI decrease,” Boesel said. “However, strong HPI growth can be misleading as a measure of market strength.”