Economist predicts Houston will continue to cool



In just the last five years Houston tripled its oil production and delivered hundreds of billions of dollars into the economy. But now the city's oil sector is fighting a slump in oil prices. The reality hasn't kept people from investing as "10.3 million sq. ft. of new office space will come on-line by the end of 2016," according to reports less

In just the last five years Houston tripled its oil production and delivered hundreds of billions of dollars into the economy. But now the city's oil sector is fighting a slump in oil prices. The reality hasn't ... more Photo: Spencer Platt, Getty Images Photo: Spencer Platt, Getty Images Image 1 of / 1 Caption Close Economist predicts Houston will continue to cool 1 / 1 Back to Gallery

Houston may not have seen the worst effect yet of the oil price plunge, according to a housing economist.

Economist Tom Lawler, a former senior vice president of Fannie Mae and housing consultant, told Calculated Risk blog, that based on data from the Houston Association of Realtors as well as data on job growth, oil prices and single-family home permitting that city's economy has not fully adjusted to the decline in oil prices.

"There is a pretty good chance that Houston will see negative employment growth next year, along with a rise in its unemployment rate to above 6 percent," Lawler told the blog. "This environment, combined with the lack of meaningful reduction in housing production to date, suggests (1) housing production in the Houston MSA should decline significantly next year; and (2) overall home prices should fall as well."

The Chronicle reported earlier this month that double digit reductions in home sales as well as a dip in sales tax were evidence of the effect of the drop in oil prices that has introduced uncertainty into Houston's market since the summer.

Before the oil price drop, Houston was one of the fastest growing areas in terms of population growth and employment growth from 2011 to 2014. The employment rate in Houston is now higher than the national average since 2006, according to Lawler.

Single-family building permits have slowed this year compared to last year, which saw month after month of record-setting numbers. They have not slowed as much as some economists would hope give unemployment growth, he said.