Real Estate Agent/Property Management · Houston, TX · Member since 2014 · 1k+ posts · 827 votes
While reading this article about falling oil prices, I couldn't help but wonder what, if any, effect it would have on the real estate markets in energy-heavy local economies like Midland-Odessa and other West Texas cities, not to mention Oklahoma and the Dakotas.
As soon as the Saudis succeed in destroying the Iranian economy and start cutting production to match demand, prices will start to rise. Once some sort of meaningful economic recovery happens in the developing world, they will rise further.
The Saudis have not cut their production, for basically the first time ever when faced with sharply lower demand, because they are using oil as an economic weapon against Iran (and maybe Russia, at our behest). Oil prices below $100 bbl are very, very bad for Russia and Iran. Oil prices at $65 mean Iran cannot feed its people.
Thanks to increased US production and new technologies, there is a spread that the Saudis can exploit. They can hurt the Iranians and Russians who need $100 bbl, while not angering the US, where producers will survive with $65.
And after that all plays out, prices will rise, probably by a lot.
I was about to start a thread almost exactly like this one, but the forum software pointed this one out.
From my standpoint, the quesion is, what's the play here? A lot of these areas have been very hot for multifamily investing. Does the oil bust mean they've gone though top dead center of the cycle, and are now heading down? How closely do housing prices in these areas follow oil prices, and how quickly?
Not really affecting my buy and hold rentals and seller finance houses in houstn and san antone. My buyers/renters are contractors not in oil. I still earn 12 cap on 45-55k houses. On the ones I seller financed, I did the rehab but the buyers fix them. Rentals are still good too, no problems with vacancies so far. I like the no fixes aspect of the ones I just hold notes on. Starting to come round to that idea more and more then last couple years..