Falling oil prices aren’t just causing mortgage rates to go down; they’re also driving down home prices and pushing unemployment up in some areas, a new Trulia study finds.
Historically, big oil price drops have been associated with job losses and falling home prices in energy-producing regions in the U.S., such as Texas, Oklahoma and Louisiana.
And, of late, oil prices have plunged, dropping from more than $100 per barrel in July 2014 to around $50 per barrel this month.
In analyzing year-over-year trends in oil prices, jobs and home prices from 1980 to the present in the 100 largest metros, Trulia has found that in oil-producing markets, home prices tend to follow oil prices, but with a lag.
“For instance, in the 1980s, the largest year-over-year oil price declines were in early- and mid-1986. In Houston, job losses were steepest in late 1986. But home prices didn’t slide most until the third quarter of 1987,” Trulia writes. “Since 1980, employment in oil-producing markets has followed oil-price movements roughly two quarters later and home prices have followed oil-price movements roughly two years later.”
While home prices and oil prices move in the same direction in oil-producing markets, they tend to move in the opposite direction in many other markets.
Cheaper oil lowers the costs of driving, heating a home and other activities, boosting local economies outside oil-producing regions. In the Northeast and Midwest, especially, home prices tend to rise after oil prices fall.
To read the full Trulia report, click here.
Written by Emily Study
