Tags: oil | home | prices | fracking

MarketWatch: Oil Price Plunge May Undermine Home Prices in Production Areas

By    |   Tuesday, 06 January 2015 02:25 PM

Economists have thoroughly parsed the impact of plunging oil prices on the economy.

But one area that hasn't received much attention is the housing sector. The oil price slide, which has totaled 55 percent since late June, could wreak havoc on housing markets in the areas where oil is being produced by hydraulic fracturing (fracking).

U.S. home prices rose at an annual pace of 5.5 percent in November, according to CoreLogic. But it says that pace could fall to 4.6 percent by November — the lowest rate since mid-2012 — thanks to falling energy prices in states such as Texas and North Dakota, MarketWatch reports.

"Three of the top four states with the highest [home] price appreciation are energy intensive and had been benefitting from the energy boom, which is currently receding as oil prices trend downward," Sam Khater, deputy chief economist at CoreLogic, tells the news service.

"These states — Texas, Colorado and North Dakota — may see some downward pressure on prices in 2015."

Meanwhile, former Wells Fargo CEO Richard Kovacevich says OPEC's refusal to cut oil production represents an attack against U.S. fracking companies. Fracking becomes unprofitable with oil priced around $60 to $70 a barrel, experts say.

"OPEC is playing this game to see how long it's going to last. They want to punish some of the fracking that's going on," Kovacevich tells CNBC.

The world oil market has 1 million barrels a day of surplus capacity, and Saudi Arabia could easily reduce its output by that amount, he notes. "I was playing golf with the CEO of a major oil company this past weekend, and he says 1 million barrels is not a lot to absorb."

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Economists have thoroughly parsed the impact of plunging oil prices on the economy.
oil, home, prices, fracking
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2015-25-06
Tuesday, 06 January 2015 02:25 PM
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