Will Houston’s Apartment Market Slip with Oil?
As the oil glut persists and concerns over a global economic slowdown mount, oil prices are expected to remain low for an extended period of time, likely lasting several years. The longevity of low oil prices leads to growing concern about economic stress and the effect on the multifamily rental housing market. In fact, the impacts on the multifamily market in energy-dependent areas are already being felt. Houston, having the largest energy-related employment base and the most multifamily housing stock among energy-dependent markets, is of particular concern.
In May 2015, we analyzed the potential impacts low oil prices could have on Houston’s multifamily sector. At the time, the key inputs to our baseline scenario did not foresee the protracted oil price slump. In the months that followed our report’s release, the price of West Texas Intermediate dropped more than originally predicted — to less than $30 per barrel in late January 2016, the lowest level since September 2003.
On the positive side, despite oil prices dropping lower than anticipated, job growth remained positive in Houston throughout 2015, albeit much lower than the past few years, while overall multifamily fundamentals continued to remain strong. Some multifamily submarkets in Houston; however, have already begun to feel the effect of the oil slump.