Oil is pushing its way down to below $47.50 per barrel as of Monday, and there’s no sign it’s going to change anytime.
Saudi Prince Al-Waleed bin Talal says in an interview today that the days of $100 per barrel oil are over.
Some worry the recent plunge in oil prices could cause home prices to slip in the oil-producing markets of Texas, Oklahoma, Louisiana, and elsewhere, writes Jed Kolko, the chief economist for Trulia (TRLA).
“But it typically takes two years for oil prices to fully affect home prices in those markets,” Kolko writes. “At the same time, lower oil prices could boost home values in the Northeast and Midwest.”
Paul Diggle, property economist at Capital Economics, says in a client note that any drag on housing in oil-driven markets from drop in demand and from decline in employment in the United States would be offset by increased consumer spending power.
“If production and employment are scaled back, housing markets in some oil-producing States, which have recently been among the most buoyant, could potentially suffer,” Diggle writes. “But any drag that this may generate will be more than offset by the wider boost to household incomes. Combined with looser credit conditions, lower oil prices should therefore give housing a boost.”
He says that the slump in oil prices could have both positive and negative effects on the housing market. The negatives are centered on the shale-oil producing states, where extraction costs over the long-run may be higher than the current $50 per barrel oil price. A dip in oil production and investment would hit jobs and ultimately housing market activity.