oil prices and real estate

How Real Estate Markets Could Be Harmed by Low Oil Prices

Share on facebook
Share on twitter
Share on linkedin

With all the news we’ve been bombarded with over the last month concerning the coronavirus, the stock market, and the government’s response. You may have missed a crucial piece of news that can have huge impacts on the real estate market and local economies throughout the United States.

I’m talking about the plummeting price of oil.

Sure, the stock market is a great indicator of the economic health of the United States and the global economy, but there’s actually a loose correlation between stocks and real estate.

However, oil prices can have a direct impact on local communities, major cities, and entire states.

In this article, we’re going to go over the current situation with oil, due to the coronavirus, and the effects it could have on your home’s value.

The Situation

Once it became clear that the coronavirus wasn’t going away anytime soon, the members of OPEC, led by Saudi Arabia, came together in Vienna, Austria to discuss the oil strategy they would use to combat the financial fallout from COVID-19.

The members of OPEC agreed to cut oil production down by roughly 1.5 million barrels per day. This would keep oil prices higher and more stable so that oil companies could remain profitable while the virus takes its course.

Russia, being entangled with OPEC due to their volume of oil production, was expected to agree with the deal.

Then everything fell apart.

Russia, in efforts to prevent U.S. shale oil companies from increasing their market share, announced that they would not abide by the agreement. They then went the extra mile and stated as of April 1st, they would remove the restrictions on national oil production to compete with U.S. companies.

In response, Saudi Arabia and OPEC reversed their position. Saudi Arabia declared that they would start producing an additional 10 million barrels/day and grant price cuts to their most preferred customers, thus, launching a price war with Russia.

The problems with this:

  • Oil markets are already near capacity and now it’s being flooded with more oil.
  • Due to the travel industry being the hardest hit by COVID-19, oil consumption is at all-time lows.
  • Lower consumption = lower demand = lower prices = little-to-no profits.

After a two-week-long price war, Saudi Arabia has effectively positioned itself to dominate the next 10 years of oil production, even surpassing the United States.

By keeping prices low ($15-$30 per barrel), Saudi Arabia’s largest producer, Aramco, can out-earn U.S. shale oil companies, who have increased costs of producing oil ($23 per barrel vs $8).

Over a sustained period, this will bankrupt U.S. oil companies.

So, how does this pertain to the real estate market?

Energy-Focused Economies Will Get Hit Hard

The primary oil producers in the United States are Texas, Oklahoma, New Mexico, Louisiana, and North Dakota.

oil states

While oil doesn’t directly affect the real estate market, it does create a domino reaction that can reach the real estate market over time.

Here’s how:

The United States is the largest oil producer in the world as of the coronavirus outbreak. When global oil prices drop, the U.S. must follow suit to stay competitive.

This causes oil companies in the United States to lose profits. When companies lose profits, they must reduce the number of employees they have.

This means layoffs.

With fewer employees, companies lower the volume of supply purchases to keep positive checking accounts. This causes the supply companies that provide the material, which include PVC piping, steel, plastics, etc., to take a financial hit. Now the supply companies start to lose profits and another round of layoffs follow. The cycle continues.

With these new layoffs, obviously, you have an unemployment problem.

When states like Texas have over 300,000 of their citizens employed in the energy industry, it’s not good news for an economy that has mortgage payments.

We wind up with a bunch of foreclosures that can drastically lower the property value of neighborhoods. Once sellers take their reduced equity somewhere else, they have to settle for lower-priced homes, which lowers the value of other neighborhoods, and the dominoes keep falling.

Suddenly, you have an entire city where property values have plummeted, equaling millions of dollars in lost wealth.

But does this affect everywhere?

Energy-Focused States vs Non-Energy States

Not every state in the U.S. relies on energy production. While sure, the effects of oil prices are felt at the gas pumps across the nation (Lower oil prices actually help the consumer by lowering the price of gas).

The real estate markets that get hurt the most are the ones in energy-focused states because that’s where the majority of layoffs will stem from.

While sure, the supply chain companies will face significant losses, those supplies can be converted and sold to other industries.

Oil companies have one job. Extract oil.

They’re not convertible.

So, I would hedge my bets that if this oil crisis continues without the U.S. putting its foot down and stopping Saudi Arabia and OPEC from a hostile takeover of the oil industry. Then the real estate markets in Texas, Oklahoma, Louisiana, North Dakota, and New Mexico will be hurt the most.

However, there’s more to consider.

Big Cities vs Small Towns

Let’s look at Houston, TX. One of the largest cities in the nation, as well as one of the larger oil cities.

If the oil crisis continues, how bad does the Houston economy, in terms of labor markets and real estate markets, suffer?

Looking at the chart below, it’s hard to argue that the Houston economy is not built for sustainability.

Houston labor market

Despite being a major energy-focused city, Houston has an extremely diversified and balanced job market.

Keep in mind that the entire energy industry is not going to lay off all of its employees. Even if Houston lost 20% of its energy labor force (a very high number), they would still be well prepared for the economic fallout.

You wouldn’t see a huge reduction of wealth in real estate, compared to a smaller town like Williston, ND.

Williston, a town that at one point, had over a third of its labor market employed in the energy industry.

A major oil boom back in 2010 brought people from across the nation to the Southwestern North Dakota town to take part in the profits oil companies were reaping. Come 2015, the oil boom was slowing down, and many employees found themselves jobless and displaced.

This led to stagnant growth in the real estate market.

Williston, ND median sales price

To go even further, take a look at Williston’s labor market as of 2020.

Williston, nd labor market

Energy isn’t even the leading labor market now. It goes to show the effect oil boom-and-bust cycles can have on economies.

The Point in All of This

My point in this analysis is that the oil crisis could displace a lot of smaller communities that rely on oil production for their economic stability.

If prices remain low and Saudi Arabia is able to gain control of the oil market for years to come, we might be on the verge of economic stagnation, or collapse, in these smaller, rural towns. Obviously, dragging down the real estate market along with it.

Let me know what you think of the economic crisis and how it could be handled in the comments below.

If you’re an investor, obviously, I recommend against investing in big oil states at the moment. I can assure you that Asheville would be the better choice.

Stay Classy.

Matthew Myre

Matthew Myre

Matthew is a North Carolina real estate agent and the CEO of Berri Properties. Matthew brought his passion for writing to his career by creating the Berri Properties Blog, which now ranks as one of the Top 50 Best Real Estate Blogs in the world. His favorite things are basketball, history, politics, and popcorn. Feel free to contact him at matthew@berriluxuryproperties.com

Matthew Myre

Matthew is a North Carolina real estate agent and the CEO of Berri Properties. Matthew brought his passion for writing to his career by creating the Berri Properties Blog, which now ranks as one of the Top 50 Best Real Estate Blogs in the world. His favorite things are basketball, history, politics, and popcorn. Feel free to contact him at matthew@berriluxuryproperties.com
Share on facebook
Share on twitter
Share on pinterest
Share on linkedin
Share on reddit
Share on email
Share on print

157 Responses

  1. Have you ever considered about including a little bit more than just your articles? I mean, what you say is important and everything. But imagine if you added some great images or video clips to give your posts more, “pop”! Your content is excellent but with images and clips, this site could undeniably be one of the very best in its field. Terrific blog!

  2. I genuinely enjoy looking through on this site, it has superb articles. “And all the winds go sighing, For sweet things dying.” by Christina Georgina Rossetti.

  3. Today, I went to the beach front with my children. I found a sea shell and gave it to my 4 year old daughter and said “You can hear the ocean if you put this to your ear.” She placed the shell to her ear and screamed. There was a hermit crab inside and it pinched her ear. She never wants to go back! LoL I know this is completely off topic but I had to tell someone!

  4. I simply want to say I am just beginner to blogging and really loved this website. Probably I’m planning to bookmark your blog post . You definitely come with really good writings. Thanks a lot for revealing your web page.

  5. I’ve been surfing online greater than three hours these days, yet I by no means discovered any fascinating article like yours. It’s pretty worth sufficient for me. In my opinion, if all site owners and bloggers made just right content material as you probably did, the internet will be a lot more useful than ever before.

  6. Thank you, I’ve recently been looking for info approximately this topic for a long time and yours is the greatest I have found out so far. But, what in regards to the bottom line? Are you certain about the source?

  7. I simply want to tell you that I am just all new to blogs and seriously loved this web page. Probably I’m want to bookmark your blog . You amazingly have really good articles and reviews. Thanks a lot for sharing your website page.

  8. I have observed that in the world today, video games are definitely the latest rage with kids of all ages. Periodically it may be extremely hard to drag young kids away from the video games. If you want the very best of both worlds, there are many educational gaming activities for kids. Thanks for your post.

  9. I just want to mention I’m newbie to blogging and truly savored you’re web-site. Probably I’m want to bookmark your blog post . You absolutely come with good articles. Thank you for revealing your web-site.

  10. Do you have a spam issue on this blog; I also am a blogger, and I was curious about your situation; many of us have developed some nice procedures and we are looking to exchange solutions with others, please shoot me an email if interested.

  11. Its like you read my mind! You appear to know a lot about this, like you wrote the book in it or something. I think that you could do with a few pics to drive the message home a bit, but other than that, this is fantastic blog. A great read. I’ll certainly be back.

  12. A person essentially assist to make significantly posts I’d state. This is the first time I frequented your web page and up to now? I amazed with the analysis you made to make this actual publish extraordinary. Excellent task!

  13. Oil prices should be checked on a regular basis so that you don’t face the oil crisis issue and it is good to follow this article, thanks for sharing this information with us.

  14. I just like the helpful information you supply in your articles. I’ll bookmark your weblog and test once more here frequently. I’m somewhat certain I will be told plenty of new stuff right here! Good luck for the following!

  15. It’s the best time to make some plans for the future and it is time to be happy. I’ve read this post and if I could I wish to suggest you some interesting things or advice. Maybe you can write next articles referring to this article. I wish to read even more things about it!

  16. A powerful share, I just given this onto a colleague who was doing a bit of analysis on this. And he in actual fact bought me breakfast as a result of I discovered it for him.. smile. So let me reword that: Thnx for the deal with! But yeah Thnkx for spending the time to debate this, I really feel strongly about it and love reading more on this topic. If attainable, as you grow to be experience, would you thoughts updating your weblog with extra details? It’s highly useful for me. Large thumb up for this blog post!

  17. Excellent read, I just passed this onto a friend who was doing a little research on that. And he actually bought me lunch because I found it for him smile Therefore let me rephrase that: Thank you for lunch!

  18. Superb blog! Do you have any hints for aspiring writers? I’m planning to start my own website soon but I’m a little lost on everything. Would you recommend starting with a free platform like WordPress or go for a paid option? There are so many choices out there that I’m completely confused .. Any recommendations? Thank you!

  19. Greetings! I know this is kinda off topic but I was wondering which blog platform are you using for this website? I’m getting fed up of WordPress because I’ve had problems with hackers and I’m looking at options for another platform. I would be fantastic if you could point me in the direction of a good platform.

  20. Hello there! I know this is somewhat off topic but I was wondering which blog platform are you using for this site? I’m getting tired of WordPress because I’ve had problems with hackers and I’m looking at options for another platform. I would be fantastic if you could point me in the direction of a good platform.

  21. obviously like your web site but you have to check the spelling on quite a few of your posts. Several of them are rife with spelling issues and I in finding it very troublesome to inform the reality then again I will definitely come back again.

  22. Awesome blog! Do you have any tips for aspiring writers? I’m hoping to start my own site soon but I’m a little lost on everything. Would you advise starting with a free platform like WordPress or go for a paid option? There are so many choices out there that I’m completely overwhelmed .. Any recommendations? Appreciate it!

  23. My coder is trying to persuade me to move to .net from PHP. I have always disliked the idea because of the costs. But he’s tryiong none the less. I’ve been using WordPress on a variety of websites for about a year and am nervous about switching to another platform. I have heard very good things about blogengine.net. Is there a way I can import all my wordpress posts into it? Any help would be really appreciated!

  24. Almost all of what you assert happens to be astonishingly legitimate and it makes me wonder why I had not looked at this in this light before. Your piece truly did switch the light on for me personally as far as this topic goes. However at this time there is actually one particular issue I am not really too cozy with so whilst I attempt to reconcile that with the actual central idea of your position, allow me see what all the rest of the subscribers have to say.Very well done.

  25. I do trust all of the ideas you’ve offered on your post. They’re very convincing and will definitely work. Nonetheless, the posts are too brief for beginners. May you please extend them a bit from next time? Thank you for the post.

  26. Definitely believe that which you stated. Your favorite justification appeared to be on the net the simplest thing to be aware of. I say to you, I definitely get annoyed while people consider worries that they plainly don’t know about. You managed to hit the nail upon the top and defined out the whole thing without having side-effects , people can take a signal. Will probably be back to get more. Thanks

  27. Virtually all of the things you state is supprisingly legitimate and that makes me wonder the reason why I had not looked at this with this light previously. Your article really did switch the light on for me personally as far as this subject matter goes. But there is actually one point I am not really too comfy with and whilst I try to reconcile that with the actual central idea of the issue, let me observe what all the rest of your visitors have to say.Very well done.

  28. Howdy, i read your blog from time to time and i own a similar one and i was just wondering if you get a lot of spam remarks? If so how do you stop it, any plugin or anything you can suggest? I get so much lately it’s driving me mad so any help is very much appreciated.

  29. Excellent blog! Do you have any recommendations for aspiring writers? I’m hoping to start my own site soon but I’m a little lost on everything. Would you advise starting with a free platform like WordPress or go for a paid option? There are so many options out there that I’m totally overwhelmed .. Any recommendations? Thank you!

  30. Thanks a lot for giving everyone an extremely wonderful possiblity to read articles and blog posts from this website. It can be so good and packed with a great time for me and my office mates to visit your website particularly thrice per week to study the newest tips you have got. Of course, I’m at all times contented concerning the unbelievable tips and hints you give. Certain 4 tips in this posting are rather the best I’ve had.

  31. Great – I should certainly pronounce, impressed with your website. I had no trouble navigating through all tabs and related info ended up being truly easy to do to access. I recently found what I hoped for before you know it in the least. Reasonably unusual. Is likely to appreciate it for those who add forums or anything, website theme . a tones way for your client to communicate. Excellent task..

  32. I do agree with all the ideas you’ve presented in your post. They’re very convincing and will definitely work. Still, the posts are very short for newbies. Could you please extend them a little from next time? Thanks for the post.

  33. Within the other hand, it doesn’t matter how high quality you are along with solving the latest platform, in due course you can utilize a situation in the place you should want to do a couple help approaching; additionally influenced by your actual age moreover gym, plus the dietary of any caravan it’s really a notably difficult physical fitness. caravan touch up paint

  34. Undeniably believe that which you stated. Your favorite justification seemed to be on the internet the easiest thing to be aware of. I say to you, I certainly get annoyed while people think about worries that they just don’t know about. You managed to hit the nail upon the top and also defined out the whole thing without having side-effects , people can take a signal. Will likely be back to get more. Thanks

  35. I’ve been surfing online more than three hours today, yet I never found any interesting article like yours. It’s pretty worth enough for me. In my opinion, if all webmasters and bloggers made good content as you did, the web will be a lot more useful than ever before.

  36. I needed to draft you a very little remark so as to thank you the moment again just for the marvelous opinions you have shared on this page. It is so extremely open-handed with you to grant unhampered what exactly a few individuals could possibly have sold as an ebook in order to make some cash for their own end, principally since you might well have done it if you ever decided. The tactics likewise worked like a good way to know that most people have the identical dreams just like my very own to figure out way more around this condition. I am sure there are several more pleasurable moments up front for many who go through your blog.

  37. Woah! I’m really loving the template/theme of this website. It’s simple, yet effective. A lot of times it’s very hard to get that “perfect balance” between usability and visual appearance. I must say that you’ve done a very good job with this. Additionally, the blog loads very quick for me on Opera. Excellent Blog!

  38. Excellent blog! Do you have any recommendations for aspiring writers? I’m hoping to start my own website soon but I’m a little lost on everything. Would you suggest starting with a free platform like WordPress or go for a paid option? There are so many choices out there that I’m completely overwhelmed .. Any tips? Thanks!

  39. Good day very nice site!! Man .. Beautiful .. Amazing .. I will bookmark your website and take the feeds additionally…I’m happy to search out a lot of useful information right here in the publish, we’d like develop extra techniques in this regard, thanks for sharing. . . . . .

  40. Hey! This is kind of off topic but I need some guidance from an established blog. Is it very difficult to set up your own blog? I’m not very techincal but I can figure things out pretty fast. I’m thinking about setting up my own but I’m not sure where to begin. Do you have any tips or suggestions? With thanks

  41. I’m impressed, I must say. Actually rarely do I encounter a weblog that’s both educative and entertaining, and let me tell you, you will have hit the nail on the head. Your concept is excellent; the issue is one thing that not enough individuals are speaking intelligently about. I am very completely happy that I stumbled throughout this in my seek for one thing referring to this.

  42. Hey there! This is kind of off topic but I need some help from an established blog. Is it difficult to set up your own blog? I’m not very techincal but I can figure things out pretty quick. I’m thinking about creating my own but I’m not sure where to begin. Do you have any points or suggestions? Appreciate it

  43. I’m also commenting to make you understand what a incredible discovery my cousin’s child obtained reading through the blog. She figured out a lot of issues, including how it is like to have an amazing coaching mood to make certain people very easily fully understand some tricky things. You truly did more than people’s expected results. Thanks for offering these interesting, dependable, edifying and also unique tips on that topic to Lizeth.

  44. Youre so cool! I dont suppose Ive learn anything like this before. So good to find someone with some authentic ideas on this subject. realy thanks for beginning this up. this website is one thing that’s wanted on the internet, someone with a little bit originality. helpful job for bringing one thing new to the internet!

  45. Nearly all of what you point out is astonishingly accurate and it makes me wonder why I had not looked at this in this light before. This article really did switch the light on for me as far as this specific topic goes. However there is actually just one factor I am not too comfortable with and while I attempt to reconcile that with the core idea of the position, allow me see exactly what the rest of your visitors have to say.Well done.

  46. Hi there, i read your blog occasionally and i own a similar one and i was just curious if you get a lot of spam comments? If so how do you protect against it, any plugin or anything you can suggest? I get so much lately it’s driving me insane so any help is very much appreciated.

  47. Hey there! I’m at work surfing around your blog from my new apple iphone! Just wanted to say I love reading through your blog and look forward to all your posts! Keep up the excellent work!

  48. I want to voice my appreciation for your kindness for men and women that actually need help on this concept. Your personal dedication to getting the solution up and down had become quite valuable and has surely permitted some individuals just like me to realize their ambitions. Your amazing warm and friendly tutorial implies a great deal to me and especially to my office colleagues. Thanks a lot; from each one of us.

  49. I’m impressed, I must say. Really hardly ever do I encounter a weblog that’s each educative and entertaining, and let me inform you, you’ve gotten hit the nail on the head. Your idea is excellent; the issue is one thing that not sufficient individuals are speaking intelligently about. I’m very glad that I stumbled across this in my seek for one thing relating to this.

  50. Good post. I study something more difficult on completely different blogs everyday. It should all the time be stimulating to read content from different writers and observe just a little one thing from their store. I’d prefer to make use of some with the content material on my blog whether you don’t mind. Natually I’ll offer you a hyperlink on your net blog. Thanks for sharing.

  51. I think this is one of the most vital information for me. And i am glad reading your article. But want to remark on some general things, The site style is wonderful, the articles is really nice : D. Good job, cheers

  52. I am also commenting to let you understand what a nice encounter my wife’s princess encountered checking your site. She learned many details, which include what it’s like to possess an ideal coaching mood to have the rest effortlessly completely grasp chosen extremely tough topics. You really surpassed our desires. Many thanks for imparting these good, healthy, explanatory and as well as fun tips on your topic to Jane.

  53. Hi! This is kind of off topic but I need some help from an established blog. Is it very hard to set up your own blog? I’m not very techincal but I can figure things out pretty quick. I’m thinking about setting up my own but I’m not sure where to begin. Do you have any ideas or suggestions? Thank you

  54. I do like the manner in which you have presented this particular issue and it does present me some fodder for thought. However, coming from what precisely I have personally seen, I basically hope as the actual responses pile on that men and women continue to be on point and in no way get started on a soap box of some other news of the day. Anyway, thank you for this superb point and even though I do not really agree with this in totality, I regard the standpoint.

  55. I loved as much as you’ll receive carried out right here. The sketch is tasteful, your authored subject matter stylish. nonetheless, you command get got an impatience over that you wish be delivering the following. unwell unquestionably come more formerly again since exactly the same nearly a lot often inside case you shield this hike.

  56. Unquestionably believe that which you said. Your favorite reason seemed to be on the net the simplest thing to be aware of. I say to you, I definitely get annoyed while people consider worries that they plainly do not know about. You managed to hit the nail upon the top and also defined out the whole thing without having side-effects , people could take a signal. Will probably be back to get more. Thanks

  57. Today, I went to the beach front with my kids. I found a sea shell and gave it to my 4 year old daughter and said “You can hear the ocean if you put this to your ear.” She put the shell to her ear and screamed. There was a hermit crab inside and it pinched her ear. She never wants to go back! LoL I know this is completely off topic but I had to tell someone!

  58. I’m also writing to make you be aware of what a beneficial encounter my cousin’s child had reading your web site. She came to find such a lot of things, with the inclusion of how it is like to have an awesome helping style to get other folks smoothly thoroughly grasp selected problematic matters. You truly surpassed readers’ expectations. Thanks for giving those valuable, trustworthy, edifying as well as easy guidance on the topic to Jane.

Leave a Reply

Your email address will not be published. Required fields are marked *

Subscribe to the blog for the latest real estate tips, tricks, and more.

Related Posts

© 2020, BERRI LLC. All rights reserved.

realtor and equal housing opportunity

Best For buyers, sellers, investors, agents, and marketers.

Subscribe to Our blog for the latest tricks and tips in real estate