Negative Equity On The Rise In Many Energy Industry-Dependent Parts Of The Country

April 14, 2016

The price for oil has fallen from over $100 per barrel in summer 2014 to under $40 a barrel today.

As a result, many states and areas that are dependent on the energy industry are beginning to feel the full effects of the slowdown. Last year, local rental markets, especially those in Texas, began to display the effects of the falling oil prices. Now, these effects are beginning to show themselves in purchase markets, as well, Zillow reports. Home values in parts of the country that are heavily dependent on the energy and oil industries are beginning to fall, and negative equity is beginning to rise.

Areas that have higher employment in the mining and oil-gas extraction industries have seen home values start to grow less quickly or even fall in some cases. Additionally, these same areas have seen negative equity decline more slowly or begin to grow.

In 2014, metros where the mining industry accounted for the highest share of the total employment saw a -2.8 percent change in home values and a -2.8 percent change in the negative equity rate. Meanwhile, metros with the lowest share of mining industry employment saw the median change in home values rise to 7 percent and the median change in negative equity rate reach -5.2 percent. In five of the six metros with the highest dependence on energy-industry jobs, home values declined.

However, the slowdown in these energy dependent markets is not likely to spill over into national and financial housing markets.

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