Lower Oil Prices Could Stall Home Appreciation

January 8, 2015

Oil prices are plummeting, which is great news for drivers at the pump, but could it negatively effect economies and housing markets that have been fueled by the energy boom?

Communities most impacted by the drop in oil prices may start to see a slow in home prices, according to a report by CoreLogic. Dropping energy prices could notably strike states such as Texas and North Dakota.

"Three of the top four states with the highest price appreciation are energy intensive and had been benefiting from the energy boom, which is currently receding as oil prices trend downward," says Sam Khater, deputy chief economist at CoreLogic. "These states — Texas, Colorado, and North Dakota — may see some downward pressure on prices in 2015."

Alaska, North Dakota, and Texas reportedly are already facing a dramatic decrease in state revenues heading into 2015 because of the lower oil prices. On Monday, oil prices hit a six-year low, dropping to below $50 a barrel for the first time since April 2009. More recently, the price of oil was averaging $100 a barrel.

Still, many rating agencies are optimistic that most energy states will be able to withstand the drop in oil prices, and the states' economies are diversified enough with their other employment sectors to weather it.

Source: “Crashing Oil Prices to Hit Home-Price Appreciation,” MarketWatch (Jan. 6, 2015); “State Budgets Hit Hard by Falling Oil Prices,” The Daily Caller (Jan. 5, 2015)