Houston’s boom is over.
That’s what analysts at BMI Research argued in a research note on Texas’ second-largest metro area on Tuesday.
Houston was the largest contributor to economic growth in the US, ahead of cities like New York, Dallas, and San Francisco from 2010 to 2015. It was possible because oil prices were near $100 per barrel, the shale-oil revolution was gaining steam, and skilled workers from other states flocked in.
But when the tables turned in 2014, Houston came in direct contact with the most severe oil crash in a half-century. The worst of the oil downturn appears to be over, but the same pace of expansion that Houston saw in recent years is unlikely to repeat itself.
“Houston is more reliant on the mining industry — comprised mostly of oil and gas extraction — as well as tangential manufacturing and services sectors that are tethered to hydrocarbon production than Texas as a whole,” the analysts wrote.
“As such, the collapse in oil prices significantly impacted the region’s local economy more severely and will likely take longer to recover, particularly as energy prices slowly rise through 2020.”
BMI Research isn’t forecasting for an economic collapse in the region. Much like projections for the US economy, they’re expecting growth to continue, but just not at the rate that we’re used to seeing.
BMI Research thinks real gross metropolitan product (GMP) to fall by 0.2% this year and grow by 1.4% in 2017, which is below the five-year average of 4.5%.
The impact of the oil crash on Houston has been well documented by some of the largest companies that do business there. For example, executives at Harley-Davidson, The Cheesecake Factory, and Del Frisco’s Restaurant Group noted sluggish activity to their investors during their second-quarter earnings calls.
The housing market there is also showing signs of strain. John Burns Real Estate Consulting recently put Houston as the only major city being on the verge of entering the “full downturn/recession” phase of the housing-market cycle, although it’s expected to hold up through 2017.
In short, Houston’s best years are over, for now.