Oil’s Impact On Real Estate: Review Of Houston’s Home & Land Values Since Energy Downturn
Two years ago, when oil prices fell by half, a number of pundits predicted that the Houston real estate market would be in for a massive fall, and new buyers would be in for “great deals.”
We studied both home prices and land prices of 52 Top Ranked Houston Neighborhood (“Where Can I Afford To Live On My Salary”) to see what actually happened, and where you can find the best values now.
HOME PRICES: Notable Highlights
- 2016 set new records for 21 neighborhoods (40% of total).
- 2015 was the high water mark for 28 areas (54% of total).
- On average, 2016 home values are down by 3% in these areas.
- 2014 or earlier set the record for 3 areas (6% of total).
- On average, 2016 home values are down by 10% in these areas.
LAND PRICES: Notable Highlights
- 2016 set new records 23% of the time.
- 2015 was the high water mark for 32% of the neighborhoods.
- 2014 or earlier set the record 45% of the time.
- For neighborhoods that are down from prior highs, the median drop in land price is 13%.
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Some of the worst values now are new construction. Many builders bought land prices at the peak in 2014 or 2015 and also had higher labor and materials cost. As such, there’s a lot of overpriced (some with major quality issues) new construction inventory sitting around.
Key Takeaways
- Houston is still growing and actually added 50,000 jobs in the last year. Gains in healthcare, government, retail & accommodations overcame job losses from energy and manufacturing.(1)
- The price of crude has more than doubled from its February trough. The North American drilling fleet has added more than 150 rigs over the past five months. Bellwether companies, like Halliburton and Schlumberger, also reported profits in the most recent quarter.(2)
- In a number of areas, prices have moved up in the last 30-60 days and inventory has fallen.
- Home values in Top Ranked Neighborhoods located near major job centers (Downtown, Galleria, Medical Center) have done well on a 1, 5 and 10 year basis.
- Some of the worst values in the market are from new construction homes. Many builders bought high land prices in 2014 and 2015 and experienced high labor and materials cost (see why). As such, many are either not being realistic on their current list prices (and their inventory is sitting) or their quality of construction is suffering.
- Some of the best values in the market are older homes with larger lots in premier neighborhoods. There’s less buyer competition from builders, land values fell further than home prices, and (based on the 10 year sales trend) will likely will rebound faster.
Contact me for both a list of recommended mortgage providers (and who to avoid), and tips for some of the fastest growing areas now.
RECORD YEARS OF HOUSTON’S BEST NEIGHBORHOODS
Summary – Record Homes Prices So Far
| Inner Loop Areas | Areas Outside The Loop | |
| 2016 | Greater Heights, Highland Village, Museum District, Royden / Afton Oaks, Riverside | Briargrove Park, Champions, Clear Lake, Copperfield, Cypress, Friendswood, Fall Creek, Garden Oaks, Jersey Village, Kingwood, League City, Missouri City, Northwest Houston, Pearland, Sienna, Spring / Klein |
| 2015 (Down 3% on avg) |
Bellaire, Braeswood, Cottage Grove, Downtown, EaDo, Timbergrove, Medical Center, Memorial Park, Midtown, Montrose, Rice Military, River Oaks, Washington / Sabine, West University | Briargrove, Energy Corridor, Katy, Knollwood, Galleria, Memorial Villages, Memorial, Memorial West, Meyerland, Oak Forest, Spring Branch, Sugar Land, Tanglewood, Woodlands |
| 2014 Or Prior (Down 10% on avg) |
River Oaks Shopping Area | Eldridge North, Royal Oaks |
Summary – Record Land Prices So Far
| Inner Loop Areas | Areas Outside The Loop | |
| 2016 | Medical Center, Memorial Park, Midtown, Rice Military | Cypress, League City, Kingwood, Memorial Villages, Spring Branch, Sugar Land, Woodlands |
| 2015 (Down 11% on avg) |
Cottage Grove, EaDo, Greater Heights, Highland Village, Montrose, Museum District, River Oaks Shopping Area, Timbergrove, West University | Briargrove, Friendswood, Garden Oaks, Knollwood, Memorial Close In, Memorial West |
| 2014 (Down 14% on avg) |
Bellaire, Braeswood, River Oaks, Royden / Afton Oaks, Riverside, Washington / Sabine | Briargrove Park, Galleria, Meyerland, Oak Forest, Katy, Tanglewood |
| 2013 or Prior | Champions, Clear Lake, Copperfield, Energy Corridor, Pearland, Missouri City, Northwest Houston |
HOUSTON ECONOMY AT A GLANCE
The Energy Downturn Slowed Down Growth in Houston…
The energy downturn has slowed down growth in Houston. The good news is the price of crude has more than doubled from its February trough.
The North American drilling fleet has added more than 150 rigs over the past five months. Bellwether companies, like Halliburton and Schlumberger, reported profits―albeit small ones―in the third quarter.
… However Economic Diversity Helped Absorb Job Losses Ending To A Net Gain In Employment
Healthcare (9,000 jobs), Construction (7,000), Government (5,000), Accommodation & Food Services (5,000), Retail (5,000) industries made up the bulk of the nearly 50,000 jobs created the past year.
This more than offsets the jobs lost in Wholesale (2,000), Manufacturing (9,000), and Energy (9,000).
Overall, the diversity of Houston’s economy helped avoid a repeat of the downturns in the past.
As outlined in the graph below, the difference between the 2007/2008 financial crisis financial crises to the oil price drop two years ago is vast. In 2009 (just one year after markets crashed), the job growth plunged to -110.6. This year, we still netted a positive growth.
While the stabilizing oil industry also helps, the growth in various Houston industries like Health, Construction and Retail keeps future projections rosy.
Houston’s Living Costs and Housing Costs Continue To Be Marginally Lower Than US Metros
Where Houston Economy Stands and Where It’s Projected To Go
HOME PRICES OF TOP HOUSTON NEIGHBORHOODS
HOME PRICE RECORD YEARS OF POPULAR HOUSTON NEIGHBORHOODS
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LAND PRICES OF TOP HOUSTON NEIGHBORHOODS
LAND PRICE RECORD YEARS OF POPULAR HOUSTON NEIGHBORHOODS
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More About Paige MartinTop Realtor In Houston
As featured on Fox News in the Morning, Houston Business Journal, and Houston Chronicle, Paige Martin, a consistent Top Producing Broker-Associate and head of the Houston Properties Team, is ranked amongst the top Keller Williams agents in the United States.
Paige Martin is ranked as one of the top residential real estate agents in the world.
A Houston-area native, Paige is an experienced, successful partner in any residential real estate transaction. Armed with a local perspective of the city & a deep knowledge of Houston real estate market, her skills have marked her as one of the most sought-after agents in Houston.
Upon graduation from Baylor University, Paige launched a career as a marketing consultant, developing customized marketing plans and strategies for her clients. She now uses those professional marketing skills to help her real estate clients find and sell their homes.
When working with home sellers, Paige employs individually-tailored, cutting-edge techniques to gain her clients the most value in the shortest time.
She is also an ideal partner for buyers, helping them make informed home-buying decisions with the least amount of stress.
Paige is passionate about her work, her clients and her city. Her attention to detail and excellent communication skills make her the perfect choice for those looking to buy or sell a home in Houston.
In addition to her robust real estate career, Paige was appointed by Houston’s Mayor Bill White to serve on the Board of Directors for the Downtown Redevelopment Authority and Tax Increment Reinvestment Zone #3 (TIRZ), where she volunteers her time as a Chairman of the Housing Committee, as well as a member the Budget & Finance Committee. Paige also serves a variety of non-profits, civic and community boards and has been recognized for fundraising by the Houston Police Foundation.
A member of the National Association of Realtors, Texas Association of Realtors and Houston Association of Realtors, Paige has served on the Houston Association of Realtors MLS Advisory Group, in which she volunteers on the TEMPO Task Force and the CMA Task Force. Paige is also the co-chair of the Keller Williams Realty – Memorial Office’s Luxury Homes Committee.
Paige Martin is a customer-focused Houston Realtor’ (member of the National Association of Realtors) dedicated to providing exceptional service. Paige and her team guides clients through all aspects of learning about Houston, relocating to Houston, buying a home, buying a highrise or condo, tips for selling your home and ensuring that your transaction goes as seamlessly as possible.
Email Paige at Paige@HoustonProperties.com or call 713-384-5177 today for personalized service.
Sources, Methodology & Disclosures
- http://www.houston.org/pdf/research/quickview/Economy_at_a_Glance.pdf
- http://www.houston.org/pdf/research/quickview/Most_Current_Talking_Points.pdf
- http://www.houston.org/assets/pdf/economy/Employment%20Forecast-2016-web.pdf
- We analyzed the 52 areas listed in the Top Houston Neighborhoods – Where Can I Afford to Live on my salary https://www.houstonproperties.com/houston-neighborhoods/salary-needed-to-buy-home
- All data was sourced from the Houston Association of Realtors MLS service,
- For each, we looked at the median sold price per square foot for single family home sales between January 1, 2016 – Nov 15, 2016 and compared that with prior full year median home sale prices.
- The one exception was downtown Houston, where we looked at median sale prices for high rise condos (since Downtown has a negligible amount of single family homes sales per year).
- In addition, we analyzed at the land value by taking the median sold price per square foot for both lots and single family homes priced as “Lot Sales.”
- Neighborhoods with a materially inconsistent amount of data were excluded from the land value calculations.
