December 22, 2014

Where Home Prices Have Become Quite Dear

Bloomberg reports on Norway. “Norway’s government disregarded a recommendation from the nation’s financial regulator to boost the counter-cyclical buffer for banks by the end of next year to guard against housing market and debt risks. Plunging crude prices are damping growth prospects for western Europe’s biggest oil and gas producer. The counter-cyclical buffer will be kept at 1 percent from June 30, the Finance Ministry said in a statement. That was also the recommendation from the central bank, while the Financial Supervisory Authority wanted a buffer of 1.5 percent by Dec. 31, 2015, citing a ’significant risk’ from growth in household debt and house prices.”

“‘The Ministry has among other things put emphasis on increased uncertainty about future economic development,’ according to the statement. ‘Housing prices are rising at the same time as there are signs of a slowdown in the Norwegian economy, particularly as a result of the fall in oil prices.’”

Full Time Whistle on Scotland. “Robin Allan, chairman of the independent explorers’ association Brindex, has warned the oil and gas industry may not recover from its current crisis as millions of pounds disappear from Scotland’s economy. A property specialist said the oil and gas crisis was having an impact on the housing market. Julia Willett, an associate in Strutt & Parker’s Banchory office, said: ‘The drop in the price of oil and redundancies across the oil industry has reduced confidence in the city of Aberdeen and Aberdeenshire. It has shaken our core market, which in the past has been shored up by oil industry workers.’”

The Calgary Herald in Canada. “Crude oil and other commodity price volatility has returned as 2014 draws to a close, negatively impacting the near-term outlook for resource-based economies in Canada, particularly Alberta, says a new report by TD Economics. Derek Burleton, deputy chief economist with TD, said Alberta has a very important share of its economy tied to oil. ‘There’s a pretty clear link between oil prices and the near-term direction of the Alberta economy,’ he said. ‘Lower incomes and profits from the energy patch will be felt in capital spending plans and increasingly spill over to other areas of the economy as 2015 progresses.’”

“The report said Alberta’s housing market, which has been among the hottest markets, will likely experience a significant slowing in resale activity and housing starts over the forecast horizon.”

From Reuters. “After leading the U.S. economic recovery out of recession, some of the nation’s top oil states are showing early signs of a slowdown as a result of the plunge in crude prices. In Houston, Texas, the first oil industry layoffs have been announced, with realtors there predicting a sharp decline, up to 12 percent, in home sales next year.”

“Alaska’s 2015 fiscal year budget revenue forecast will have to be lowered by almost $2 billion, according to Fitch Ratings. States such as Texas, North Dakota, Alaska, Oklahoma and New Mexico are all likely to feel strains next year, Wells Fargo Securities municipal analyst Roy Eappen said. Russell Evans, an Oklahoma City University economist, said the 1982 oil crash has left deep scars in Oklahoma where oil and gas industry accounts for about 20 percent of all jobs and two-thirds of those created since 2008. The history of booms and busts keeps many on edge. ‘There is a fair amount of anxiety here,’ he said.”

Fuel Fix on Texas. “Data from Barclays that shows Texas housing permits have followed U.S. benchmark crude prices in long downward-sweeping arcs – as they did dramatically in the oil bust three decades ago and in the financial crisis five years ago. If West Texas Intermediate crude ‘remains at $60 through year-end 2015, this will be a decline on par with the 1986 and 2009 events that coincided with significant declines’ in Texas housing permits, Barclays analysts wrote. The British bank said the connection between crude prices and Texas housing is ‘likely due to collateral damage on Texas’ energy-dependent economy.’”

The Midland Reporter Telegram in Texas. “Midland’s average home prices topped $300,000 for November, the third time that has happened and the second time this year, according to numbers from the Real Estate Center at Texas A&M University, with November prices growing by almost 14 percent compared to November of last year. The rise in home prices continues despite a drop in oil prices since June, with oil dropping from around $108 a barrel to the mid-$50s. ‘Oil prices are the number one issue facing the Texas housing market next year,’ Real Estate Center research economist Jim Gaines said. ‘It’s the big unknown.’”

The Dallas Morning News in Texas. “Texas is the nation’s largest oil-producing state, and many companies related to the oil industry are based here and employ many people who spend money on goods and services provided by other businesses. Oil and gas account for about 11 percent of the state’s economic output. ‘I think we’re starting to see the first impact on [energy] sector employment,’ said Boyd Nash-Stacey, economist for BBVA Compass bank in Houston. ‘It takes about a quarter for the impact of prices to affect the real economy. The main concern we have is how this spills over to the rest of the economy.’”

“Michael Feroli, chief U.S. economist for JPMorgan Chase, takes a bleak view of what an oil industry slowdown might mean for Texas. ‘We think Texas will, at the least, have a rough 2015 ahead, and is at risk of slipping into a regional recession” if oil prices remain low, he said Thursday in an economic research note. A slowdown also could affect the housing market in some Texas metro areas where home prices have become ‘quite dear,’ he said.”

The Longmont Times Call in Colorado. “Total construction activity in Colorado for 2015 is forecast to increase by $1.4 billion, according to the annual Leeds School report. Residential permit values are expected to return to higher levels and more units are slated to be built. A surge will also be seen in nonresidential building. ‘The economic rebound is important,’ said Dan Krische, co-owner of Krische Construction in Longmont. His company enjoyed a strong 2014 and expects more of the same next year.”

“‘We are doing projects now, this year, that if the economy hadn’t rebounded would have never been done,’ Krische explained. ‘And now we have more work in Weld County because of the oil, building warehouses and offices over there.’”

Bits Bucket for December 22, 2014

Post off-topic ideas, links, and Craigslist finds here.