With experience, calmness persists in the Lone Star State
As the country looks on to see if Houston can withstand the stress test of lower oil prices, many of us are unperturbed. We’ve been to this rodeo before. As one oil executive put it, “I don’t need to go to Las Vegas. I’m in the oil business. I live in Las Vegas every single day.” As for me (and I’m dating myself), I’ve been in real estate for over 28 years and remember well those crazy 80’s years. I’ve been through two recessions and two bubbles and made it out alive and intact.
But let’s back up a minute and look at this situation realistically. This isn’t another 80’s bust. The housing market back then had a financial foundation thinner than tissue paper. We had non-recourse loans, so if things didn’t work out, we could simply give back the property. Real estate was used as a tax shelter. Deals could be a losing combination of both. You held your breath and hoped for the best. It was like keeping your high school kid home from school for a month and crossing your fingers that everything was going to be okay.
Getting back to the present, when the numbers come in, sales for both November and December are going to be lower, we know that. But it’s not because of lower oil prices. It’s for a couple of reasons:
- 60% of all buyers in the Houston market (I did a very unscientific survey) are from out of state. These folks don’t move or look at homes during the holidays. They come in the spring.
People from all over are beginning to understand that the economy has changed permanently. The ups and downs of the national economy is “the new normal.” In Texas, it’s always been the norm!
In 2007 and 2008, it was the stock market that incurred massive injuries, yet Houston experienced only a sniffle. We’ve been through much worse than $50-$60 oil. We know that what goes up does come down, and vice versa. Panic isn’t something Houston does—and it doesn’t need to. It’s sitting pretty as an economically stable place to live:
· We’re still an in-migration state. People are moving into Texas, not leaving. Seven of the fifteen fastest growing cities are located in Texas.
· #1 in job creation. Texas leads the nation in the creation of jobs; 40% since 2009. (If it slows down, we’ll still be happy. It would give us time to fix our roads.)
· Minimal building. When oil prices go down, lenders get a little uneasy. Spec building comes to almost a complete halt. But on the bright side, this stabilizes the supply and demand sides of housing. Apartment building slows down. Yippee!
· In Texas, your home will never be your ATM machine; there are no equity lines of credit. Easy money always ends up being bad money. Because Texans are not able to access our home equity with an ATM card, it is a bit more complicated than that. It is a harder process so foreclosures stay down and our real estate market stays relatively stable.
· People nest when there is change. When you go to work and things aren’t so happy-go-lucky, you tend to stay put with your housing. So inventory will stay down.
· Most people in the oil business saw this coming. And they’ve been talking about it for six months, so no big surprise or shock. They have remained calm.
So take a deep breath and relax. We have traveled this road before and we know where it leads.