HouseCanary, a provider of software products that combine data and predictive analytics to help forecast local real estate markets, released a study April 7 on the impact of recent oil price drops on the real estate market.
In many markets, oil price changes are a leading indicator of home value changes, but the impact varies based on the composition of the local economy. Although some markets positively correlate and have a dampening effect on home prices (meaning when oil prices fall, it will slow the growth or potentially erode home prices), others negatively correlate and can be stimulated by falling oil prices.
“Understanding leading indicators in the market is critical to forecasting the markets and sound real estate investment. [Our] data sciences team tracks thousands of variables across all U.S. markets and ZIP codes to provide insight into market movement,” HouseCanary President JP Ackerman said.
As a result of falling oil prices, HouseCanary’s forecast for housing prices adjusted down 1,000 basis points (bps) to 10 percent cumulative growth through Q3 2017 in Odessa, Texas. The impact was smaller in Houston, falling only 200 bps to 17 percent cumulative growth through Q3 2017. In contrast, over the last 40 years, the Detroit economy repeatedly has been stimulated by falling oil prices, resulting in a bolstered home price forecast of 500 bps to 23 percent cumulative growth through Q3 2017.
“Savvy investors and real estate developers are harnessing the power of Big Data to understand leading factors to maximize investment returns and get a competitive advantage,” HouseCanary CEO and co-founder Jeremy Sicklick said. “The U.S. markets are increasingly affected by data that can be tracked, digested and transformed into strategy.”
“Strength in oil prices from 2014 are still fueling market conditions, but if low oil prices persist, the impact to home values will be more material,” HouseCanary Chief of Research and co-founder Chris Stroud said.