Fourth quarter numbers from Local Market Monitor Report are in for the Midland and Odessa real estate markets and the enthusiasm is being dialed back for both markets.
Notably, they have lowered the investment score for Midland to 2.7, making is speculative. Odessa’s number is now 4.9, making it medium risk. Reports earlier this year had both markets much higher.
The reports note in both Midland and Odessa, economic growth has been good since the recession because of the development of shale oil deposits and the large energy sector currently dominates the economy. Overall, job growth was good in recent months, but in Midland, growth in the energy sector was poor. In Odessa, job growth was good in recent months, and growth in the energy sector was fair.
Total housing permits in October in Midland were down 16 percent from last year. Single family permits were down 16 percent. In Odessa, total housing permits in October were down 23
percent from last year. Single family permits were down 23 percent.
Nationally, home prices are forecast to increase by 4.4 percent over the next year. Home values for Midland are forecast to decrease by 1 percent over the next 12 months. In the second and third year, prices are forecast to increase 3 percent and 5 percent, respectively. Home prices in this market peaked in the first quarter of this year at $184,812. Since their peak, prices have fallen by 3 percent, and the current home price is $179,091.
In Odessa, home values are forecast to increase by 4 percent over the next 12 months. In the second and third year, prices are forecast to increase 7 percent and 8 percent, respectively. Over the last three years, prices were up 21 percent in Odessa, peaking in the third quarter of this year at $212,832, which is the current average home price. The report authors say to expect a strong housing market the next few years.
They also note during the recession, home prices dropped a mild 3 percent in Midland, and 6 percent in Odessa, even though Texas was an epicenter of subprime mortgage lending. Population growth has been high in both regions.
In both markets, they forecast rents to increase 27 percent over the next three years, to an average of $1,781 per month in Midland and $1,206 per month in Odessa. Rents rarely decrease, they say, but sharp job losses and falling home prices can push them down. Rents are closely related to local income. Monthly rent on average is 2 percent of local per capita income, but there is a lot of variation.