A particular corner of the Houston housing market may have a shield against the current oil slump wafting through the city known for energy business. Even with low oil prices impacting jobs and the city’s overall economy, the home building companies of the area are optimistic that business will boom even within a temporary oil bust.
The Houston Business Journal recently reported that the custom housing market is not experiencing the same reduction in sales as the area’s energy businesses. John Leggett, the president and CEO of On Point Custom Homes stated that within the past two weeks, their traffic and sales have actually increased significantly. Even though stock prices and earnings have fallen for many production home builders nationally, Leggett exclaimed that the Houston custom-home market will endure the drop in crude oil prices for two potential reasons.
The former investment banker and now home building realtor acknowledged that the U.S. Federal Reserve is flirting with the idea to raise interest rates on property. Although it’s unknown whether those increases would hit the mortgage market, buyers may not be willing to take that chance on their dream home.
“People’s minds are going, ‘Do I want to play Russian roulette with home prices and mortgage rates?'” Leggett said.”
His second reasoning may come as a sigh of relief for those in the higher sector of the oil and gas industry. Most of the cuts and layoffs are taking place in the oilfield service sector and are passing over the higher-paying petroleum engineering jobs in Houston.
While falling oil prices are going to hit Houston — we’d be naive to think otherwise — it’s not going to be as directly as everyone thinks,” Leggett said. “These companies won’t be cutting as many of the high-paying positions, because it’s so hard to attract those engineers, and it would be difficult to hire them back when oil prices rebound.
Reglardless, Leggett told the Buisness Journal that Houston homebuilders are moving along with caution on new projects. According to the Greater Houston Partnership, last month, residential construction permits fell 17.4 percent to $214.1 million. However, Leggett noted that if there’s good land and good opportunity, it would be unwise to sit on the purchase.
Although Houston, a hub for energy-related industries may have a particular may weather the storm Texas overall may not be so lucky. With thousands of jobs on the chopping block and less revenue being pumped into the Texas economy it’s inevitable that people in those careers who were geared up to buy a new home will have to wait until a new chance arises.
CNN Money recently quoted predictions from Credit Suisse analyst Michael Dahl who believes home construction could tumble 20 percent in Texas this year due to job losses and reduced confidence from the energy slide. “Employment growth is one of the most important drivers for housing, with job and income growth driving both local demand and increased population from relocations,” stated Dahl.