Oil Price Movement is a Leading Indicator of Home Values, but the Impact
- Oil price changes are a leading indicator of home values across the US
Falling oil prices will dampen growth where local economies are
heavily based in the production of oil
Many local economies are stimulated by low oil prices thereby fueling
demand and housing price growth
According to HouseCanary Chief of Research & Co-founder, Chris Stroud:
“Strength in oil prices from 2014 are still fueling market conditions,
but if low oil prices persist, the impact to home values will be more
SAN FRANCISCO–(BUSINESS WIRE)–April 7, 2015–
HouseCanary (housecanary.com) released a study today on the impact of recent oil price drops on the real estate market. In many markets, oil price changes are a leading indicator to housing value changes, but the impact varies based on the composition of the local economy. While some markets positively correlate and have a dampening effect on home prices (meaning when oil prices fall, it will slow the growth or potentially erode home prices), others negatively correlate and can be stimulated by falling oil prices.
“Understanding leading indicators in the market is critical to forecasting the markets and sound real estate investment. The data sciences team tracks thousands of variables across all US markets and zip codes to provide insight into market movement,” says JP Ackerman, President at HouseCanary.
As a result of falling oil prices, HouseCanary’s forecast for housing prices adjusted down -1,000bps to 10% cumulative growth through Q3 2017 in Odessa, TX. The impact was smaller in Houston, falling only -200bps to 17% cumulative growth through Q3 2017. In contrast, over the last 40 years, the Detroit economy has repeatedly been stimulated by falling oil prices resulting in a bolstered home price forecast of +500bps to 23% cumulative growth through Q3 2017.
“Savvy investors and real estate developers are harnessing the power of big data to understand leading factors to maximize investment returns and get a competitive advantage,” says CEO and Co-founder Jeremy Sicklick. The US markets are increasingly affected by data that can be tracked, digested and transformed into strategy. According to HouseCanary Chief of Research & Co-founder, Chris Stroud, “Strength in oil prices from 2014 are still fueling market conditions, but if low oil prices persist, the impact to home values will be more material.”
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