Most of the worst housing markets in America have one thing in common: oil.
The oil crash is making housing markets in energy-producing areas much worse than most other places.
Nationwide’s Health of Housing Markets Report for the first quarter showed that nationally, housing-market activity is still healthy. At best, it’s in a “Goldilocks” state, according to Nationwide chief economist David Berson.
But the impact of the plunge in oil prices — by 60% since June 2014 — is made very clear in a performance ranking of housing markets.
Eight of the bottom ten ranked metropolitan statistical areas (MSAs) are in Texas or Louisiana. We’d note that there’s more to their economies than oil and gas exploration.
To rank the markets, Nationwide created a leading index of healthy housing markets that uses data to deduce the near-term performance of housing markets. Nationally, it’s at a two-year low of 105.4, but above the breakeven level of 100.
“What’s really happening there is a significant slowing — if not an outright — decline in job growth,” Berson told Business Insider on Thursday. “And besides households, jobs are the other key determinant of housing demand. With the drop in energy prices, we’re seeing, in many energy MSAs, significant slowing in jobs growth lowering, housing demand and the index in those MSAs.
The upshot was that home buyers were so few that sellers had to lower prices to raise demand.
That’s the opposite of what’s happening in many large cities, where high demand and undersupply are lifting prices.