Sure, new home construction is still hot in Midland, but with layoffs looming for many oil patch workers, some are wondering if historic high prices are headed for a precipitous fall. At least, that’s what Midland Reporter Telegram business columnist Rye Druzin is wondering:
Some Realtors have told me that part of the reason for the rapid increase in prices is because Midland’s real estate market stagnated during the 1990s and early 2000s because of low oil prices. Another reason is that with the oil boom that began in 2009, thousands of people streamed into Midland and Odessa, the only major population centers in the Permian Basin. This large influx of people, many of whom were being paid good oilfield wages, led to a severe housing shortage in an area that wasn’t prepared for the growth.
So, with low supply and high demand, prices went through the roof. It’s economics 101, really. The only real question is, with oil prices at $50 per barrel, will prices come back down to pre-existing levels? Or will demand hold out?
Druzin notes a dynamic that we’ve previously reported on, and that’s how high demand is for new housing even with several oil companies idling locations and laying off workers:
Even now, home builders tell me that if they could get all their homes for 2015 online right this moment, they would not have enough stock for demand and they would continue to build. Big builders such as DR Horton and Betenbough have shown so far this year that they are not slowing down, applying for permits with the city at a similar rate to last year. Their confidence seems reflected in the fact that Midland has not felt a deep cut yet from layoffs in the oil industry.
Of course, Local Market Monitor is still projecting growth for both Midland and Odessa housing markets, speculating that these two West Texas towns, the hotbeds of the Texas oil industry, are still low-risk investments. And yet, one must wonder if those new multi-family developments with high rents will go south, or whether rents will drop as optimism flags.
The real crux is whether we’ve truly felt the impact of dropping oil prices?