Houston Investors- Energy Corridor Sample Analysis & Oil Rant

[Trey Watson]

I posted this on my BP blog but figured would probably get more traffic on the forums.

**To maximize table and graphs you will need to go to my biggerpockets blog on my profile and click the pictures to enlarge. Forum wont let you enlarge.***

The state of the oil industry obviously has people concerned. There are many investors and would-be investors, who are now unsure of their strategy or overall desire to be invested in real estate due to the looming question; what will low crude prices do to the Houston job market and subsequently the housing market in the near future?

Most people understand that real estate tends to lag behind other asset classes in terms of changes in value. Oil has been dropping for quite some time, layoffs have been frequent, corporate revenues are tanking. As a result, I believe the general sentiment of the market is that r/e is due for a correction in the very near future.

What sort of drop should we expect? No one can predict the future, but we can always look to the past for guidance. I've gathered some data from HAR on the famous 'Energy Corridor' area of Houston, to illustrate some of the changes/activity in the r/e market over the last 15 years. I think the Energy Corridor is appropriate to sample, given the subject.

This data really won't help anyone predict what is going to happen, but I think it does a great job at creating perspective on the true motion of real estate prices. Notice the 'crash' of 2006-2008. Not as impactful on prices as you might think.

I believe that real estate is the single most effective way to build wealth. We are in a time unlike any other in history, where the general population is becoming more educated on the basics of owning real estate as an investment.

Back to technicals: So what I did here was- I took the average sale price, avg price/sqft and avg days on market of a 2,200 sqft 3/2/2 home in each stated subdivision. You can see what one would expect to sell this size home for each year (back to 1999) given the comps provided during that time period. I chose July 1st through February 2nd of each year to sample because that goes 6 months back from when I started running this data.

I hope this is helpful, if not interesting.