With Western Texas Intermediate oil hovering around $45 a barrel, folks have been speculating about new home construction in Midland-Odessa and how layoffs and budget cuts might affect the spectacular boom of the past few years.
But while economists might raise a red flag, local homebuilders say pent-up demand and a more diversified economy are keeping the phones ringing and people signing on for new home construction.
“The demand is still the same as it has always been—everyone wants their home built yesterday,” said KC White, owner and president of KC White Homes, Inc. “More people outside of the oil world are calling my phone. There are more than just oilfield-related jobs here.”
Last year, 917 single-family building permits were issued to homebuilders for new residences in Midland, and 430 in Odessa, according to the U.S. Census Bureau and Real Estate Center at Texas A&M University. With the ink still wet on those contracts, builders don’t see a slowdown anytime soon. Many even have a waiting list.
Tight inventory is one of the biggest factors at play. With only 3.8 months of inventory in November 2014 (the most recent data available), the average home price in Midland was $301,500. Odessa had an even tighter market in that same month, with only 2.4 months inventory, and an average home price of $231,100. Jump to read more!
Midland has been running on fewer then four months of housing inventory since November 2011, which echoes a statewide trend.
“Since late 2013, months of inventory has been less than four months in Texas, indicating a very tight housing market that puts upward pressure on home prices,” write Dr. Luis Torres and Dr. Mark G. Dotzour in Outlook for the Texas Economy January 2015. “The demand for homes has far outpaced the supply. The development of lots and limited labor for new home construction have affected the supply of Texas homes for sale.”
The influx of new residents to the Midland-Odessa area for work is also driving housing demand. Employment in Midland grew by over 5,100 jobs in from January to November 2014, and in Odessa by over 3,500 in that same period, according to the U.S. Bureau of Labor Statistics.
But even with all these strong market indicators, the massive drop in oil prices has builders carefully watching the situation.
“We are always concerned with the drop in oil prices—it causes buyers to rethink getting into a new mortgage loan,” said Odessa homebuilder Oscar Franco, owner of Custom Homes by O. Franco. “They mainly want to wait and see if they are going to be laid off.”
Some longtime West Texas builders, like White, believe the falling oil prices will mostly affect big builders, and that smaller firms, like his, will continue to do business as usual.
“I grew up in West Texas when there wasn’t a ‘boom,’ just a boring old normal workday for the old men that I watched, and we all survived just fine—some homebuilders even flourished,” he said. “The big boys who have to sell 5,000 homes a year will leave and us local boys and girls will carry on doing what we love to do.”