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Oil Prices Beginning to Affect Real Estate Markets

Despite their recent jump, the fall in oil prices has been effecting real estate markets. Since the end of last year, many energy companies have had to reduce capital spending and layoff major numbers of employees (falling oil prices have been responsible for 39,621 job cuts in the first two months of the year according to a prominent outplacement firm). This has been felt throughout the economy, as new evidence shows that rental markets are now taking a hit. A study done by Zillow shows that the median estimated monthly rental price for single-family home, condominiums and apartments in oil-dependent metropolitan areas is rapidly falling. Zillow breaks down the most oil and gas dependent Texas metros as Midland-Odessa, Beaumont-Port Arthur, Houston and Corpus Christi. These markets were booming before they began to rapidly cool off at the end of last summer as the oil market took a hit. In august, rents were growing by about 8% a year, compared to 6% now in oil dependent markets. The graph below from Zillow shows the rent per square foot in Texas cities, percent change from a year ago in both oil/gas dependent areas and less dependent areas.



  1. oliver2 oliver2

    This makes a lot of sense.

  2. klinedinstc15 klinedinstc15

    This is an post, I would not have guessed exactly large the differential is between the cities that are more oil dependent and less oil dependent — the widest margin being around 8% and 3%.

  3. moorem15 moorem15

    This is a very similar topic to what I am writing my paper on, the “natural resource curse” (that states become reliant on revenues from natural resources and have an otherwise under developed economy).

  4. wintera15 wintera15

    It would be cool to see that graph translated on to a map to get a sense of how this affects different regions of the country.

  5. grieve grieve

    I agree Andrew, I tried to find a graph that laid out the areas geographically but I couldn’t find a good one.

  6. HeeJu HeeJu

    While the graph above indicates a clear negative correlation between oil/gas dependency and rents, I think it is dangerous to conclude causality. What if there is another ‘omitted’ variable (I know, our favorite term from Econometrics) that is heavily affecting this trend?

  7. deplautt deplautt

    Looking at this through the natural resource curse makes a lot of sense. I wonder how much the oil price drops are affecting other industries and to what extent.

  8. Watch for the results of Mary Beth Benjamin’s project, as she tries to track this carefully at the local level. Are such job changes large and cumulating, or are they merely a slice of the churn that happens in labor markets all the time, job losses followed by new jobs in short order? Without more detail, we don’t know how many of these jobs that people have left in fact getting filled in short order, rather than evaporating. (We need industry-specific net job losses, and data on the underlying variance to know whether the numbers reported here are even statistically significant.)

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