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Exhibit 2
Estimated Change in Local GDP Due to Lower Oil Prices
Source: CoStar; R-Squared reflects the magnitude of the importance of oil in a metro’s economy
Potential Losers from Low Oil Prices
Among major U.S. cities, Houston has the most to lose from lower
oil prices and is the only primary metro in the U.S. that is expected
to be negatively impacted in a meaningful way. As the energy
capital of North America, its economy will be hit with the most
direct impact of the shock. Fortunately, that hit should not be
devastating since Houston has diversified its local economy in very
important ways since the oil bust a few decades ago, which should
end up blunting the anticipated drag on overall job growth.
There are several smaller metros that may not be so lucky and
are expected to encounter significant economic turbulence and
out-right job losses. These metros include Williston, North Dakota,
Oklahoma City, and Midland-Odessa, Texas, which have been
among the fastest growing metros in the country over the past
several years, as they have been riding the wave of growth related
to new oil well drilling. In addition, New Orleans will likely be
negatively impacted, albeit to a lesser extent.
As seen in the table below, there are several metros with nominally
large but proportionally small oil industry operations, like Williamsport,
PA, Denver, and Dallas, that could see a negative impact on their
local economies. However, the positive aspects of low oil prices,
like enhanced consumer spending and marginal expansion of
manufacturing due to lower energy costs, is expected to balance
out any negatives in these metros.
Exhibit 3
Oil/Gas Industry Employment (Including Support Businesses) and
Multifamily Housing
Source: Fannie Mae Economics & Mortgage Market Analysis, Moody’s Analytics, ACS; counts as
of 2012.
Not Much Multifamily in Impacted Metros
While housing may be in for a period of decline in fundamentals
in certain metros with a disproportionate dependence on oil
extraction, in truth, few of these metros have any significant
concentration of multifamily housing. Nationally, approximately
18 percent of housing units are in multifamily structures. As seen
in the table above, of the 33 metros listed that have a higher-than-
average concentration of jobs in the oil and gas industry, just six
metros have a concentration of multifamily housing exceeding
18 percent. And of those six metros, the only one with both an
unusually high concentration of oil and gas jobs (24.8 percent) as
well as a high concentration of multifamily housing (18.1 percent)
is Midland, Texas.
What’s Ahead for Houston?
Houston is headed for a slowdown, no doubt about it. However,
there is little agreement about the severity of the slowdown.
Fortunately, none of the major macroeconomic and commercial
real estate data providers expect the Houston economy to fall into
Lower Oil Prices and Multifamily — More Winners than Losers