I’ve had the pleasure of hearing the brilliant Dr. Ted C. Jones speak on real estate and the economy a few times and his talks are always insightful and engaging. For those of you who don’t know, Dr. Jones is the Chief Economist and Senior Vice President at Stewart Title Guaranty Company, a very bright man, and someone who never shies away from a joke. Ever since I first heard one of Dr. Jones’ talks, I’ve been compelled to keep up with him, from his twitter, to his blog, to his talks. Last month, Dr. Jones spoke here in Houston about the 2017 outlook for real estate and the economy, both locally and nationally, and I’d like to share some of the Houston highlights.
One of the points that stood out to me was that even though the oil sector is struggling, as Dr. Jones explained, this is the best oil downturn Houston has ever seen. What he means by that is if you take a look back at Houston’s previous oil downturns, it’s clear that the city’s economy has fared much better this time than in the past. During the 2008-2009 downturn, for example, we lost 121,000 jobs, which was almost 5 percent of all our jobs. By comparison, on a net job basis, we have 15,700 more jobs today than we had a year ago, meaning we impressively haven’t lost any jobs during this oil downturn. In fact, we actually have more jobs now than we’ve ever had.
As I’ve said before, and Dr. Jones has made very clear, Houston is much more than an oil and gas town these days. That’s why we’ve been able to deal with this oil downturn much better than we could even as little as 8 years ago! Where we’ve lost oil jobs, we’ve gained petrochemical jobs, and then of course there’s our Medical Center, which is the world’s largest, and the Port of Houston, which is the second largest in the United States. All these things and more are driving Houston’s economy and allowing us to more effectively cope with low oil prices this time around.
While the struggles of the oil sector weren’t necessarily seen in the number of jobs created in Houston in 2016, the effect was felt in the household income generated by those new jobs. Dr. Jones noted that the city created more lower paying jobs last year, exchanging lots of $200,000 jobs for $100,000 jobs, for example. This, in turn, negatively impacted the high-end housing market. We saw a flattening and then falling off of the high-end housing market as with fewer high paying jobs, there were less people willing to buy luxury homes in 2016. Even with less high-end homes being sold, Dr. Jones said that 2016 was the best year Houston’s housing market has ever had in both units sold and dollar volume!
Dr. Jones does expect more oil jobs in 2017 though, which is still a major boost to the Houston economy, even though we are less reliant upon oil than we were in the past. There are a number of reasons for this optimism, including year-over-year oil prices being up 42 percent, drilling and fracking a well now being more than twice as efficient as it used to be, a huge recent discovery of 20 billion barrels of recoverable oil in the Permian Basin alone, and Crain’s Business News’ announcement that oil exploration and production companies will spend 7 percent more money looking for oil this year.
The strength of Houston’s non-oil jobs paired with an improving oil sector has Dr. Jones forecasting 42,000 net new jobs for Houston in 2017. He also has forecasted what he expects in the near future for interest rates and he is predicting that they will rise, with 30-year house loans by the end of 2017 to about mid-year 2018 to be between 4.7 and 5.3 percent. With all this and more taken into consideration, Dr. Jones is bullish on the Houston economy over the next 12 to 24 months and expects a very good 2017 for Houston’s housing market!
To check out all the slides from Dr. Jones’ recent talk and hear his brief recap of the high points, click here.
Images Courtesy of Dr. Ted C. Jones
Buying or selling a home or have questions about the market? Give me a call at 713.829.3052 or email me at cynthia@cynthiamullins.com.
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