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Oil and Energy Boost Houston Real Estate Market

20 July 2009 No Comment

By Helen Kaiao Chang

See original story at NuWireInvestor.com.

Thursday, August 21, 2008

While other cities may be cursing high gas prices, at least one city may be cheering: Houston, Texas. With its strong oil and gas industry, Houston’s economy continues to expand, supporting the real estate market.

While other parts of the country have been hit hard by the mortgage crisis, Houston has remained resilient, as more workers enter the area to fill jobs—and buy houses. Despite an overall drop in sales, housing prices have continued to rise.

“Houston is doing better than most of the country, mostly due to energy,” said Barton Smith, economics professor and director of the Institute for Regional Forecasting, University of Houston. “We’ve been affected by the effects of the real estate crisis in the last 12 months. The difference between Houston and the rest of the country is that we are holding up against the storm, compared to the rest of the nation.”

Houston’s biggest economic fortress is its oil and natural gas industry. Energy-related industries comprise nearly 50 percent of jobs in the area, according to the Greater Houston Partnership, which promotes business in the region. The Houston-Sugar Land-Bayton Metropolitan Statistical Area posted an average of 91,000 new payroll jobs each year from 2005 to 2007, with another 53,000 new jobs added for the first half of this year.

The strong energy economy has sheltered Houston’s real estate market. “Houston is fortunate in that it has been on much stronger footing than many other markets around the country,” said Michael Levitin, chairman of the Houston Association of Realtors, or HAR, in an e-mail interview. “That’s due largely to the fact that the flourishing energy industry makes up a huge part of the region’s economic base.”

Houston’s real estate market is also holding steady, because it did not have the massive price jumps that other parts of the country had a few years ago. “This area also did not experience the pricing bubble that created bloated home values in areas like California and Florida, (which) are now hurting,” said HAR’s Levitin.

Although total residential sales continue to decline, prices for single-family homes and condos have been rising steadily. According to figures released by HAR, the area’s housing prices have risen steadily in the past decade, with the area’s average and median housing sales hit an all-time high in June this year.

In July alone, the average price of single-family houses—which is calculated by adding up the prices of all houses sold and dividing it by the number of houses—was $226,072, an 8 percent increase over the same month last year. The median price of single-family houses—which means the same number of houses sold for less than that amount as more—was $161,370, a 3.4 percent increase over the same month last year.

The numbers paint a picture of more houses sold on the higher end. Sales activity for houses above $500,000 increased 9.4 percent, while activity for those below $80,000 increased 5.6 percent in July, according to HAR.

“More homes with higher values are selling than homes with lower values,” said HAR’s Levitin. “Many of our member Realtors are working with professionals who are relocating to Houston, primarily for jobs within the energy and healthcare industries.”

Follow Helen on Twitter @HelenChang.