13 Comment

• joel July 8, 2015 at 9:26 am

  I like how every sales article has to repeat the mantra “with limited impact from low oil prices” as if saying it a thousand times over means it’s not going to happen. We’re only halfway through the year with many more layoffs to come and nowhere for oil to go but down. Global economy is slowing which should delay increased financing costs, but wages never had a chance to catch up with sales prices and with no growth there’s only one way to go here. It’s obviously not the rains and it’s the long term trend lines that are out of whack as even if the realtors admitted in the article.
• Robert Boyd July 8, 2015 at 9:51 am

  Wouldn’t you say that sales of new homes are down less because of layoffs than because of the lack of new hires? (Both of which are caused by lower energy prices.)
• Local Planner July 8, 2015 at 10:38 am

  Agreed, while rainy weather may have had a little impact, the lack of highly-paid new hires, which is the primary thing that fed our overheated market, is reducing the fuel to the fire for the more upscale suburban subdivisions. Look for more moderately-priced homes to stay in demand, though.
• ? July 8, 2015 at 11:58 am

  An actual address would be nice for the new Krispy Kreme. Highway 6 is a long road.
• toasty July 8, 2015 at 12:49 pm

  home and apartment construction has lagged the influx of new people horribly. They’re still building to catch up.
  .
  I imagine though that the same people who were interested in buying a home a year or two ago after moving to houston are more interested in continuing to rent for another few years, or maybe they are interested in buying still, but just buying smaller.
  .
  These aren’t bad things, unless you are a developer of upscale homes.
• detroux July 8, 2015 at 1:50 pm

  5603 Highway 6 N
• MrEction July 8, 2015 at 2:01 pm

  Decline in sales could be caused by a lot of things. In the last few years we’ve seen a dramatic reduction in sales in some sectors simply due to the ridiculously limited inventory. If you want to actually follow the market trend look to see how many months inventory we have.

  As for low oil prices, a couple of things to realize. First, low oil prices is absolutely TERRIBLE for upstream (Schlumberger, Baker Hughes, Fluor, etc). However, it’s not necessarily terrible for downstream. Expensive or cheap, oil has to be refined and there has been no reduction in the demand of downstream products (gas, polymers, aromatics etc). If you know the Houston energy market then you know that Upstream is located heavily in Katy and Sugarland. Downstream is located primarily on the East Side of Houston, with some exceptions (like the EM woodlands campus). More central or (to a degree) eastern housing markets should still see significant demand.

  Second, understand that some oil companies move very slowly. Capital expense budgets are planned years in advance. Those don’t necessarily just get ripped up and thrown out the window just because the price of oil has tanked. Yet again, UPSTREAM is definitely cancelling capital left and right, I mean only a moron would drill a new low margin well right now, but Downstream? I believe at least 2 new crackers are coming online this year and a new 500+ kta polymer reactor is as well. Those aren’t stopping, and low oil prices wouldn’t stop them anyways.
• Native Houstonian July 8, 2015 at 2:20 pm

  @? – It’s 5603 Highway 6 N, Houston, TX 77084 per Krispy Kreme’s website. I wonder how long it will be until we see the Swamplot headline “Krispy Kreme leaving Houston market…Again”?…
• Aaron Layman Properties July 8, 2015 at 2:23 pm

  The Chronicle real estate desk has no shame. Blaming soft home sales on the rain is absolutely absurd. It seems as though these ladies never met a press release they didn’t like. As I have said repeatedly this year, local economists and housing industry pundits were WAY too optimistic with their projections for employment in Houston. You can’t have a collapse of that magnitude in the oil market and not have it affect the local real estate market.
  The sell-side media wants to keep pretending that this will all come up roses…but it won’t. The simple reality is that builders have been feasting on the Federal Reserve’s echo bubble in real estate and now they have all but priced themselves out of the local market. With the local job machine coming to a grinding halt, there are fewer people who can afford the expensive homes that builders seem to want to keep selling. Asset inflation without corresponding wage growth spells an inevitable mean reversion, and I think we’re just getting started here in Houston. The collapse of the Shanghai stock market could ripple into U.S. markets. If that happens, things could get ugly in a hurry here in the Bayou City with our real estate market considering it’s already well ahead of fundamentals.
  http://aaronlayman.com/2015/07/june-unemployment-rate-at-5-3-but-record-93-6-million-not-in-the-labor-force/
• Local Planner July 8, 2015 at 3:07 pm

  The comment about the overhang in demand / lag in construction of housing is well taken, especially with single family. While the input end of the demand pipeline is decreasing, especially for upstream oil and gas and their service providers, there’s still a bunch of well-paid folks who have moved to Houston in the last few years who aren’t getting laid off (yet) and would like to buy a home, and others who have been trying but have been frustrated by limited supply. It will still take some time to work through that.
  .
  As for downstream and petrochemicals, they will be increasing employment, but from what I’ve seen their industries aren’t as white-collar-job intensive as upstream oil and gas, so the magnitude of the positive change (not including the temporary workers associated with plant construction) will be much less than what was experienced with the upstream o & g boom from 2011-2014.
• Superdave July 8, 2015 at 3:47 pm

  @MrEction – Many people not from Houston have little knowledge of that little boat road east of 59. Most comments on S-lot and in the city in general, tend to act like it doesn’t exist, and that it’s not part of the overall economy.
• juancarlos31 July 8, 2015 at 4:09 pm

  So Schlumberger, Baker Hughes, Technip, Cameron etc are not “upstream” they are “Service Companies” primarily focused on “servicing” the Upstream with tools, technologies, and equipment. Upstream Oil Companies, “Operators” include Majors like BP/Shell/Chevron/Exxon and “independants” large and small (Anadarko, Hilcorp, etc).

  In that the service companies produce nothing they need constant sales of their services and technology to maintain revenue (so they are the first off the bus in bad times and the last on the bus in good times). Operators large and small have a continuous revenue stream from existing oil and gas production, and can fund dividends/growth/maintenance out of that pool. So, when projects get cancelled or postponed, the Service companies feel it first and hardest. Compare that with operators, who when they cancel future exploration or development still have existing oil and gas fields to work on/maintain/improve. So while low oil might cause big layoffs in the service companies, they’re causing relatively smaller layoffs at operators, generally ~10-20%.

  The service industry is certainly heavily concentrated near the beltway, especially along I-10/memorial. Upstream companies are found all over, downtown (chevron, Total, BG, some Shell), the galleria (Apache, BHP etc), the woodlands (exxon, Anadarko), and in that same energy corridor (Shell, Conoco, BP).
• j July 9, 2015 at 10:25 am

  Even my kids think Krispy sucks. Long live Shipley’s!!!