Decreasing oil prices can be bad for real estate markets that are tied up with oil production. Plunging oil prices can lead to loss of jobs in the market, in which case, people will have less to spend that will eventually affect demand for housing. Therefore, decrease in oil prices could eventually lead to decline in home values in markets that are dependent on oil production.
North Dakota would take the greatest hit if oil prices continue to fall. According to CNN Money, during the oil boom, North Dakota also experienced a housing boom as the abundance of jobs had attracted people into the state. Now the oil prices have been dwindling for about 12 years and North Dakota is seeing lessening demand for housing. According to Ralph DeFranco, senior director of risk analytics and pricing at Arch Mortgage Insurance Company, "The jobs are leaving, and if an area gets depopulated, they can't take the houses with them and that's dangerous for the housing market."
In a more recent report, it shows that North Dakota is not alone in this plight. According to CBC, in Canada the people connected with the St. John's condo and commercial real estate markets are also feeling the negative effects of cheap oil. Condominiums have been turned into apartment complex. But the real problem is that owners of luxury apartments could not find anybody interested in renting a unit.
Vacancy rates are going up and that pushes luxury condo owners to drop prices. According to Real estate agent Larry Hann, one condo owner felt obligated to drop rent from $5,000 a month to $3,000 so he could find a tenant. Unfortunately, no one is taking the offer, the condominium unit is still vacant. "It's fairly obvious to anyone working in the industry the prices are coming down," according to Hann.
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