One of the great things about the end of 2014 was plunging oil prices – and they are continuing to fall in 2015. Regardless of where you live you probably have gas either under $2/gallon or near $2/gallon. I personally never thought I’d see gas below $2.50/gallon in my life again. While this has been great news for us consumers, there are some hidden potholes in the economy due to the falling prices.
With this major shift in the energy sector, many are wondering how this will affect their home values.
Here’s what you need to know about how oil may affect your home’s value.
Probably the most obvious pothole is falling home prices in areas where energy is a big employer. With lower prices come less jobs and layoffs, which means more sellers than buyers. Chief economist at Trulia, Jed Kolko, put it this way.
“Oil prices have plunged from over $100/barrel in July 2014 to around $50/barrel in early January 2015, threatening oil-producing economies around the world. Within the U.S., big oil price drops have historically been associated with job losses and falling home prices in energy-producing regions. In particular, plummeting oil prices in the 1980s were followed by declines in employment and home prices in Houston, Oklahoma City, Tulsa, New Orleans, and other nearby markets.”
The top 10 areas tied to oil related jobs are:
1. Bakersfield, CA
2. Baton Rouge, LA
3. Houston, TX
4. Oklahoma City, OK
5. Tulsa, OK
6. New Orleans, LA
7. Forth Worth, TX
8. Gary, IN
9. Wichita, KS
10. Toledo, OH
Luckily for those of us in Middle, TN we don’t have a high percentage of energy related jobs and have enjoyed an overall increase in home values. As a matter of fact, according to Business Insider, Nashville is in the top 15 hottest American Cities for 2015.
If you do find yourself living in one of the areas above, there’s still good news. Generally it takes about a year and a half to two years before these factors affect your home’s value, so you still have some time before this is potentially realized.
Another area of concern which has been addressed this week is the overall market reaction to falling oil prices. We have had a slump in the stock market over the past couple of weeks, however oil has stabilized at around $50/barrel and the market has rebounded nicely. By and large the market is a measurement of investor confidence and it seems as if investors are not too worried about the slumping oil sector.
The good news for the majority of us is that lower oil prices means it can increase the value of our homes. Jed Kolko goes on to say “Cheaper oil lowers the costs of driving, heating a home, and other activities, boosting local economies outside oil-producing regions. In the Northeast and Midwest especially, home prices tend to rise after oil prices fall.”