Falling oil prices and the impact on housing markets September 8, - - PowerPoint PPT Presentation

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Falling oil prices and the impact on housing markets September 8, 2016 EMAD Global oil market dynamics In 2014, the U.S. surpassed Saudi Arabia to become the worlds largest energy producer. The rise in domestic production was

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EMAD

September 8, 2016

Falling oil prices and the impact on housing markets

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Global oil market dynamics

In 2014, the U.S. surpassed Saudi Arabia to become the world’s largest

energy producer.

The rise in domestic production was largely due to increased use of

hydraulic fracturing and directional drilling.

Oil prices began to fall, as supply increased. Demand also began to fall,

too, as global growth slowed.

Finally, a strong dollar negatively impacts oil prices.

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West Texas Intermediate spot prices

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Energy companies began seeking lines of credit to bolster cash positions as

revenue fell from lower oil prices.

Secondly, producers also hedged against falling prices by purchasing energy

futures contracts.

In recent weeks, equity firms are starting to rethink continued support for energy

producers.

Energy producers have been exercising existing futures contracts, and are now

replacing these in the current low price environment, further hurting cash positions.

As a result, companies are cutting costs. For example, Shell announced it would

cut 6,500 jobs from global workforce. Royal Dutch Shell, BP, Exxon Mobil, and Total are redirecting efforts to lower-cost production areas.

Domestic producers responses

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Rig counts (Rigdata)

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Shale well production timelines

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U.S. Crude Oil Production

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All of this is nice, but why does the housing industry care?

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Mining and logging employment trends

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Home Sales (12-month rolling avg)

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HUD MUL T I F AMI L Y – WE ST RE GI ON

Na tura l Re so urc e Ma rke ts in the We st Re g io n

Oil & Ga s

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HUD MUL T I F AMI L Y – WE ST RE GI ON

Williston, North Da kota

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HUD MUL T I F AMI L Y – WE ST RE GI ON

Williston Ma n Ca mps

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HUD MUL T I F AMI L Y – WE ST RE GI ON

T he Building Boom

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HUD MUL T I F AMI L Y – WE ST RE GI ON

Williston, North Da kota

Location Rate Per SF Williston $2,394 $3.42 New York $1,504 $2.15 Los Angeles $1,411 $2.02 Boston $1,537 $2.20 1-Bedroom/700 Square Foot Unit

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HUD MUL T I F AMI L Y – WE ST RE GI ON

Williston, North Da kota

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HUD MUL T I F AMI L Y – WE ST RE GI ON

Williston, North Da kota

128 246 1,017 1,377 1,501 1,290 612 27 147 310 278 136 340 79 8 200 400 600 800 1,000 1,200 1,400 1,600 2009 2010 2011 2012 2013 2014 2015 2016

Pe r mits Issue d - City of Williston

Apa rtme nt Units Sing le F a mily Units

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HUD MUL T I F AMI L Y – WE ST RE GI ON

Gille tte & Ca spe r, Wyoming

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HUD MUL T I F AMI L Y – WE ST RE GI ON

Oil & Ga s Produc tion – Ca mpbe ll County (Gille tte )

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HUD MUL T I F AMI L Y – WE ST RE GI ON

Oil & Ga s Produc tion – Na trona County (Ca spe r)

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HUD MUL T I F AMI L Y – WE ST RE GI ON

Wyoming Provide s 40% of the Na tions Coa l Produc tion

8 o ut o f the to p 10 c o a l pro duc e rs in the Unite d Sta te s a re mining in Ca mpb e ll Co unty

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HUD MUL T I F AMI L Y – WE ST RE GI ON

Coa l Produc tion

Pe a b o dy E ne rg y a nd Arc h Co a l o pe ra te the mine s in the a re a a nd ha ve la id o ff

ve r 15% o f the ir wo rkfo rc e . T

his numb e r is typic a l o f the la yo ffs to AL L c o mpa nie s in the industry a nd is g ro wing . T he c lo sure o f ne a rly 100 U.S. c o a l-fire d po we r pla nts in 2015, c he a pe r na tura l g a s, a nd inc re a se d g o ve rnme nt re g ula tio ns ha ve c re a te d a sig nific a nt impa c t o n the c o a l industry.

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HUD MUL T I F AMI L Y – WE ST RE GI ON

Wyoming Une mployme nt Ra te s Gille tte – 6.10% Ca spe r – 6.70% 3.6% Sinc e 2015 3.7% Sinc e 2015

*E stima te d 8,000 Na tura l Re so urc e & Mining L a b o r F

rc e

*E stima te d 4,000 Na tura l Re so urc e & Mining L a b o r F

rc e

* 2014 Co unty-Wide E stima te s

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Impa c t on Ne we r Multifa mily Housing Sinc e 2014

Gille tte Ca spe r Re nta l Ra te s:

$300

25%

$250

20% 2016 Oc c upa nc y Ra te : 80% 85% 2014 Oc c upa nc y Ra te : 99% 98%

HUD MUL T I F AMI L Y – WE ST RE GI ON

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HUD MUL T I F AMI L Y – WE ST RE GI ON

Ve rna l, Uta h

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HUD MUL T I F AMI L Y – WE ST RE GI ON

Ve rna l Une mployme nt

8.3% Sinc e 2015

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HUD MUL T I F AMI L Y – WE ST RE GI ON

Impa c t on Ne we r Multifa mily Housing Sinc e 2014

Ve rna l Re nta l Ra te s:

$200

30% 2016 Oc c upa nc y Ra te : 50% 2014 Oc c upa nc y Ra te : 96%

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Questions?