$40 Oil soon-Sell My House?

If you are convinced - go for it!!

 

I wouldn't get too scared yet. Where would you go though? Ive thought about it just because I can make a profit on my house now, but then I'd be paying more in rent than I do for my house, or I'd have to go to an apartment and no. No thank you.

I still need to come by for that beer. After the holidays hopefully.

May want to post in the business section.

 

I sold my home in the Champions area about 2 months ago. I now rent. There were a couple of reasons why I did this, but, the current oil situation definitely factored into my decision. (I am in the O&G industry)

I am going to sit on the cash and be ready to make a move on something when everything tanks. The layoffs have already started...

 

You guys having exactly been here a while have you??? haha Houston is the most stable economy in the US.. it is not going to get that bad..no matter how much our current president tries to make it for us.. Houston will never be super high..or low.. I'M buying houses..not selling them.. and the rental market is thru the roof right now..

 

Houston faired very well through the last nationwide economic downturn in '08-'10

The economy was stable and this was reflected in house sales and the consistant $ / sq.ft

The sky is not falling.

 

For every person that thinks the economy will fail, there is another that thinks it will prosper. How well can you gamble?

 

seems a little extreme to me but my best guess is this could be a 12-24 month ordeal. it's a self correcting mechanism. at $54/bbl, producers slash their capex budgets...which means rigs get dropped and fewer wells get drilled. you're probably looking at at least 500 rigs getting dropped in this price environment...probably more. but there will most certainly be a production response, albeit with a time lag.

after dropping that many rigs, domestic production should flatten if not decline, largely eliminating the excess barrels that contributed to the latest drop in crude prices. hopefully by then world economies are in better shape but in a more normal environment, we need higher cost barrels from the deepwater and unconventional resources. most of those wells won't get drilled with oil at $54/bbl. so prices will ultimately remove these higher cost barrels from the market and once demand begins growing again, we'll start all over. guess that's why they call it a cycle...

 

That's the most reasonable, practical, clear and concise analysis I've read on the matter to date.

 

Something to keep in mind (since I'm not in the area) is how much it costs to make this oil. In Canada we have a lot of tar sands style oil reserves.

If oil goes down to $50 a barrel that would have no affect if the method of oil costs $40 per barrel to attain. However I would be worried if you live near a dozen refineries that produce at $70 a barrel.

That is just a side note.

 

100%.

 

Were you in Houston in '85? What was your take on the situation then?

 

Tesla will be gearing up their battery plant in NV. Just saying, if you get laid off.
Let's hope not.


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I agree, and am directly affected as I own an oil & gas consulting and acquisition business.
This will be an interesting cycle to watch, as many of the larger players aren't really acting as if the current dip will last too long, or long enough to change their immediate plans.

The difference between now and '08-'12 is that then it was Nat Gas that tumbled tremendously, and the steady increase in oil prices allowed rig numbers and prices to remain relatively steady, fueling growth in the newly discovered US shale plays. Right now, Nat Gas prices are not at a level to support new exploration at these rig-rates.

What will happen this time?
Will Nat Gas exploration and production expand now that oil is down?
Will current rig-rates drop sufficiently to allow this?

I don't know for certain, but many of the people in these newly-rich oil plays are first-timers, and may not have the experience to survive the boom-to-bust nature of this industry.

 

I see what you're saying but think about it this way - the resulting cash flows from producing a barrel of oil at $50 versus $80 are significant. the returns on capital may still warrant investment but the AMOUNT you can spend now is significantly reduced. so either way, capex goes down unless companies are levering up their balance sheets and outspending cash flow.

 

companies are still going through their 2015 budgeting process but of those who have already announced spending plans, capital expenditures are most certainly being slashed. large and small companies alike are signalling their desire to spend within cash flow which means capex will be down 20-50% next year. will be a tough time to be in the oil service biz...

 

my 2 cts.
been in the oil biz for 25 years, and have seen a lot of cycles.

this downmove was a long time coming, and given that delay, it might take a while to shake out. 12-36 months is my guess. i also think we are going to over shoot on the downside and hit the 3 handle.
BUT things happen at all extremes. there are a lot of people who will not be enjoying a price below $75/bbl, and some of them will be tempted to do something about it. people like putin, maduro, khamenei....and it is relatively easy for them to stir the pot and set off some fireworks if they think that will raise prices.

as well, all new wells will be on hold, and it will only take 36 months to make all fracked wells in use today to drop off in production. so the supply will automatically be curtailed.

lower prices may not encourage more consumption, but it doesnt encourage conservation either. so forget about competition from renewables. forget about china trying to save fuel. every developing economy runs on diesel and that wont stop.

lower oil prices encourage more consumption of everything else, so widget factories will be running fine.

all that said, some of the industry and people that have been living on the edge, and relying on prices staying in a super high range, are going to be in trouble. there will be consolidation, and bankruptcies. some real estate in houston will be affected. but i dont see all this being armageddon.

 

Houston, i was younger but.. both my Grandfather and father were self employed truck drivers... no issues here... Its only an issue to people that lives well out of their own means anyways.. which is why Florida and California have such feast or phantom situations all the time..


36 years here... no worries what so ever... its kinda like when you work for a company that doesn't have a Union vs one that does.. If you do your job and take care of your business, you will make it no matter what...

But.. if..if you truly are worried about it, i would be selling cars, not the one thing that 99% never ever loses value..

 

Haha, zing.

 

Hmm, I think it's feast or famine. And It appears that from the chart Houston housing has suffered 9/36 years or 25% of the time. And this neglects the time for the pricing to return to even after a downturn.

OP the downturn in '08 caused ~9% downturn in home prices. Do you think that this will be worse, especially with the LNG exportation that has picked up in the last few years?

 

Do you want a house or an apartment?

 

I would expect that the crash in values in the '80's had more to do with interest rates. Home prices in Russia will probably look very similar to 1980's after their rate hike this week.