The December housing numbers from Local Market Monitor Report are not painting a rosy picture of the real estate market in Midland, and home values are forecast to decrease over the next 12 months.
Since their peak in the first quarter of 2015, home prices in Midland have fallen by 3 percent. The average home price in this market is currently $179,091.
Over the past two years, the real estate market in Midland has gone from relentlessly enthusiastic, to more reserved, as the slump in the crude oil market drags on. On Monday, oil prices fell to their lowest level in 12 years, and futures of West Texas intermediate crude for February delivery came in at $31.41 a barrel, a 5.3 percent decrease.
“In June 2014, you had to shell out $110 to buy a barrel of Brent crude. By early 2015, that had plunged to $60,” writes Brad Plumer in his piece today for Vox Energy & Environment. “Today, it costs just $30 to buy a barrel of oil — a level not seen since 2004. It’s a staggering decline.”
This crash is affecting Midland housing, and the Local Market Monitor Report on Midland is forecasting a 1 percent decrease in home values in 2016.
Although analysts are predicting the slide in oil prices is not over, the new report predicts that in the 2017 and 2018, home prices in Midland will increase 3 percent and 5 percent, respectively.
“Every signal that the market is getting now suggests that we are going to continue to have an oil glut for some time to come,” Jason Bordoff, director of the Center on Global Energy Policy at Columbia University, told the New York Times Monday. “Iran is about to re-enter the market, demand numbers and economic indicators look relatively weak, U.S. supply is holding up in a low-price environment much better than people thought and global inventories are growing.”
Nearby Odessa is not facing the same situation: their home values are projected to increase by 4 percent in 2016, 5 percent in 2017, and 7 percent in 2018. But both markets have seen their investment ratings lowered. In Midland, the 2.7 investment score from Local Market Monitor puts them in the “speculative” category. In Odessa, a 4.9 rating makes them “medium risk.”
The report for Midland notes over the last three years, home prices were up 17 percent, and prices are still well below the income price, showing weak fundamental demand. This means people should expect a weak housing market the next few years.