In January of this year, we at RentHub wanted to see how apartment rents were trending in three distinct rental markets where the local economy is driven by the oil industry. At the time, median rents in each case were declining substantially. The median rents in these three markets have continued to decline, while oil prices have somewhat stabilized. Crude oil prices are still nowhere near the $100+ per barrel during the peak, but the floor is not falling out from under the industry as it seemed to be doing when we last addressed this topic in January.
The Current Situation
As you can see by the chart, oil prices have rebounded from January when they were below $30 a barrel. As of October 25, U.S. crude oil futures were trading at $49.35. This is roughly a $20 increase since that time, but nowhere near the days where the price per barrel was over $100.
The U.S. oil industry is proceeding on a more careful footing after the price collapse that occurred. Global production levels are in flux, along with demand for the type of crude oil the U.S. produces being in low demand.
Current Rental Trends
As stated, apartment rental trends for these three markets have continued to decline. There are a few factors that this may be attributed to this decline. Below are the housing rental trends for each:
Uncertainty in the oil business will continue to translate to uncertainty in the housing sector in each of these oil towns. Williston, ND has seen greater declines in rents due to the dominance the oil boom had on that local market. Odessa and Midland, both have had a longer history of oil development. The oil boom that occurred in Williston brought on temporary housing. Because of the rapid nature of apartment development that was needed to meet the demand during that boom, more apartment rentals have come online while the local government works to remove the temporary housing.
New Development Continues
These boom markets are still working towards stabilizing. Though the local economies are now constricting, to an extent, since the days of $100+ per barrel, development, and specifically housing development continues to take place. Instead of only reacting to the rapid influx of workers, each market is preparing for longer term solutions to housing oil workers and the job sectors that help to serve those people.
In April of 2016, The Odessa Housing Finance Corp. was working to develop 181 units of rental housing.
Tax credits units in the apartment buildings would serve people who make $23,000 to $36,540 a year… About 63% of the renter population earns less than $40,000 per year in a rental market where less than 10% of rental housing is affordably priced according to the (Odessa Housing Finance Corp.)
In Midland it is reported that development of new commercial and residential uses is still set to take place, despite the drop in oil prices.
Several oil companies have recently built office complexes in the area, and drilling continues, albeit at a more sluggish pace. The city plans to build a new convention center, and construction of a municipal courthouse is underway. Several more hotels, apartment complexes and eateries are expected to open this year
In that same report, the driving force behind this development in Midland, and it can be applied to both Odessa and Williston, is because:
The prolonged bustle is partly because the city is playing catch-up, recovering from a period of frenetic growth during the recent boom, when housing was impossible to find…