No state is immune to the current economic crisis especially in housing. It is just a question of degree which is affected by job loss, and the percentage of foreclosures. Job loss means more foreclosures, and more foreclosures put a downward drag on home values which has a snowball effect on putting more homeowners in a negative equity position, then more foreclosures. it is a vicious cycle. No one is sure as to what the government will do. The current administration has not used the TARP funds to buy toxic mortgage packages, and the the new administration can do nothing until next year. In the meantime, the housing industry gets worse. So the question is, will Oklahoma melt down like Florida and Arizona, or will it just correct itself to a flat but holding value housing market?
Where was Oklahoma in 2001?
Most economist look to 2001 as the year where the future meltdown started. Even though Fed policy and the lack of oversight started in the 1980's and continued through the Clinton years, the tragedy of 9/11 brought an unbridled outpouring of money which found its way into the housing industry and was eventually packaged on Wall Street. The bubble in housing was accelerating beyond all reason. Sub-Prime mortgages had to be created so that people who could not normally afford the rising price of a property could be given a mortgage with the idea that there was no tomorrow and prices would rise forever, and refinancing would be the vehicle to use your home like a ATM to pay bills. In Oklahoma however, we were starting our recovery from the energy and agriculture recession of the 1980's that lasted into the late 1990's. We were dramatically undervalued in housing and the average price of a home in Oklahoma City was $85,000. While other areas especially on the Coast and the Sunbelt were on a steep rise in building permits and an unreal pricing structure, Oklahoma City was just on the edge of recovery.
The peak of 2005
This was the ultimate year of real estate. Sales were at their highest, and the optimism for the future was so rosy that even the sky seemed to be to low as a limit. Only a few economist like Nouriel Roubini and Paul Krugman saw through the facade of mirrors that obscured the devastation that would start a year later. Meanwhile, at the beginning of 2005 Oklahoma was be federal government standards and statistics from observers like Forbes.com put Oklahoma City as 26% below value for the level of economic growth we had sustained. The average price of a home had risen steadily and by the end of 2005 is was $125,000. That same property in California, Arizona, or South Florida would be anywhere from $450K to 1 million. The average family income had risen to $48,000, and in the suburbs as high as $75,000. Oil and gas, agriculture, technology, medical research, and government jobs were growing at a rate higher than the national average, and greater than the numbers for most American cities.
Where are we now?
As we are all painfully aware of, the country is in a very difficult time. Job losses are growing, the government has bailed out Fannie, Freddie, financial institutions, and getting ready to bail out Detroit automakers. Prices in California, Florida, Nevada, and Florida have dropped to as much as 60% of 2005 values, and they keep dropping. The stock market is stuck in neutral and it looks like we will need massive spending by the feds to pull us out of an even deeper recession. Even with this turmoil, Oklahoma City has created more manufacturing jobs than we lost since 2005, tech jobs are still growing, medical research growth at the OU Health Science Center is exploding, and it will have a cancer center that in some areas will rival MD Anderson. Two proton cancer centers are being built that brings the national total to 9, and companies like Devon Energy are increasing energy jobs, and Devon is building a new $750 million office tower. Tinker Air Force Base is expanding, and the Indian Tribes of Oklahoma are taking their Casino money and investing in Oklahoma, as well as creating more jobs than anyone here, and paying $1 billion in taxes every year. Add to this that this year Forbes declared Oklahoma City the most recession proof city in the U.S., and the Federal Housing Enterprise Oversight Board showed that Oklahoma was leading the nation in the rise of average and median price home sales.
Conclusion
Many things are going right in Oklahoma City, but the problems of a country affects everyone. 2009 will probably be flat to a slight increase here in business , but housing seems to be robust. Where overheated housing markets have 3 to 10 years of excess inventory to deal with, Oklahoma City inventory can be measured in months especially below $200K where it is still a sellers market. You can find areas of high priced homes that show 18 months of inventory but considering the plight of the national housing market, any city would be happy if that was the biggest problem to contend with. Only 6% of current MLS listings are distressed property, so foreclosures are not a drag on private sellers who are not in trouble. Investors see a stable price floor, a great rental market, and positive cash flow of $250 per month and more. All in all, it is great to be in Oklahoma City where it is a correction and one you can smile about.
Comments(0)