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Residential Department: Spotlight: Oklahoma: December 2017

 

Spotlight: Oklahoma

Oklahoma is shrugging off energy-induced recession

Oklahoma is one of the largest natural gas producers in the nation and a major supplier of crude oil as well. The state has more than a dozen of the country’s largest natural gas fields and accounted for more than 7 percent of U.S. production in 2014. In addition, two of the 100 largest oil fields are in Oklahoma, and the state ranked fifth in the nation in non-offshore oil production in 2013.

The state’s energy sector helped Oklahoma weather the years after the Great Recession as an oil boom fueled economic expansion. The state’s quarterly growth in gross domestic product (GDP) exceeded 5 percent nine times from second-quarter 2011 through first-quarter 2015, with quarterly growth rising above 10 percent three times during that period, according to data released this past August by the Oklahoma Employment Security Commission (OESC). Employment followed suit in those years, as state unemployment numbers were routinely 1 to 3 percentage points lower than the national average, according to the U.S. Bureau of Labor Statistics.

Unfortunately, the growth spurt ended abruptly when the energy market nosedived. Crude oil prices plummeted from a high of $105.79 per barrel in June 2014 to a low of $30.32 per barrel in February 2016, according to a June 2016 report from the Office of the State Treasurer of Oklahoma. The resulting layoffs and rig closures had a huge impact on Oklahoma’s economy, stripping as much as 2.5 percent from the state’s GDP in fourth-quarter 2015 alone, the report states. This began four straight quarters of economic contraction for the state.

The effects of this recession could be seen in employment and housing numbers as well. The Oklahoma housing market stagnated throughout 2016, with closed sales and average prices falling slightly year over year after posting four straight years of growth, according to data from the Oklahoma Association of Realtors. The state lost more than 16,000 nonfarm jobs in 2016 — led by a loss of 10,400 jobs in the mining and logging sector — resulting in a nearly 1 percent contraction in employment for the year, according to the OESC report and a report from the Center for Applied Economic Research at Oklahoma State University.

Oil and natural gas prices began to rise again in the second half of 2016, and the subsequent increase in production lifted the state out of its recession. Oklahoma’s GDP saw positive growth for the first time in a year in fourth-quarter 2016 and posted a second straight quarter of positive growth in first-quarter 2017, according to a July 2017 report from the Office of the State Treasurer.

Employment and housing numbers once again followed suit. The mining sector added more than 6,000 jobs in the first eight months of 2017, and Oklahoma’s unemployment rate dropped from 5 percent in September 2016 to 4.5 percent this past August. Average home-sale prices also are on the rise again this year, and surpassed 2015 prices as of this past July.

skip to 3 Cities to Watch>>  

Home sales and prices

r_2017-12_Spotlight_chart-1Closed sales and average sales prices on homes sold across Oklahoma increased from 2012 through 2015 before leveling out and actually dipping slightly in 2016, according to data from the Oklahoma Association of Realtors. The annual average sales price increased from $156,687 in 2012 to $174,731 in 2015, an 11.5 percent bump, while closed sales increased by 14.9 percent over the same time period.

Both numbers dropped by less than a percentage point in 2016 while the state was gripped by a four-quarter recession, but seem to be rebounding in 2017. The year-to-date average sales price for homes in Oklahoma as of this past July was $179,775, 4.7 percent higher than the $171,756 year-to-date average in July 2016 and 3.2 percent higher than the $174,256 mark for the same period in 2015. Closed sales year to date as of this past July also were up over comparable 2015 and 2016 levels.

Unemployment

Oklahoma’s unemployment rate increased less than 3 percentage points during the Great Recession, going from 4.2 percent in July of 2007, before the onset of the housing crisis, to a high of 7.1 percent in December 2009 — at a time when the national unemployment rate was 9.9 percent, according to date from U.S. Bureau of Labor Statistics.

A boom in oil prices kept Oklahoma unemployment well below national averages throughout 2015, but a statewide recession brought on by plummeting oil and natural gas prices increased Oklahoma’s unemployment above the national rate for the first time in almost 20 years in May of 2016, when it jumped above 5 percent as the national rate fell to 4.9 percent. As of this past August, Oklahoma’s unemployment rate stood at 4.5 percent, still 10 basis points higher than the 4.4 percent national rate.

Delinquencies and foreclosures

r_2017-12_Spotlight_chart-2Oklahoma’s foreclosure activity (defaults, auctions and REO) peaked in third-quarter 2010, with 6,039 total foreclosure filings, according to Attom Data Solutions’ estimates. This quarterly total was more than double the prerecession low of 2,790 foreclosures in second-quarter 2007. Foreclosure activity remained elevated through fourth-quarter 2011 before dropping back toward normal totals, with the exception of a short-term spike in second-quarter 2015.

As of this past July, Oklahoma’s foreclosure rate was 1.2 percent, according to CoreLogic. The national rate for that same month was 30 basis points lower at 0.9 percent. The state’s serious delinquency rate — loans more than 90 days delinquent — stood at 2.4 percent this past July, 50 basis points higher than the national rate of 1.9 percent.

Sources: Attom Data Solutions, Center for Applied Economic Research, CoreLogic, Cushing Chamber of Commerce, Greater Oklahoma City, Office of the State Treasurer of Oklahoma, Oil Sands Magazine, Oklahoma Association of Realtors, Oklahoma City Convention and Visitors Bureau, Oklahoma Employment Security Commission, Oklahoma Historical Society, Tulsa Downtown Coordinating Council, Tulsa Historical Society & Museum, Tulsa World, U.S. Bureau of Labor Statistics, U.S. Census Bureau



3 Cities to Watch

Tulsa

Tulsa was originally settled in 1836 by Native American tribes who arrived by way of the Trail of Tears. As late as 1898, Tulsa’s population totaled just 1,100. That changed when a huge oil field was discovered in 1905. By 1909, 126 oil companies had offices in the city, then known as the “Oil Capital of the World.” Today, Tulsa is the second-largest city in Oklahoma, with a population of 400,000 and a unique downtown dotted by art deco towers built by oil barons in the 1920s that stand alongside modern skyscrapers.

Oklahoma City

r_2017-12_Spotlight_cityThe state capital sprang up during the Land Run of 1889, when 50,000 people swarmed the territory at dawn (except for the “sooners” who crossed early). Upward of 10,000 people claimed lots around Oklahoma Station, which would become Oklahoma City. Today, Oklahoma City is a major crossroads, sporting more than 130 miles of federal and state highways within the metropolitan area. Powered by more than just oil, Oklahoma City also is home to University of Oklahoma and the corporate headquarters for Hobby Lobby, American Fidelity and Loves Travel Shops.

Cushing

This tiny town of 8,000 people, located between Tulsa and Oklahoma City, came to prominence in 1915 when the Cushing Fields were producing more than 300,000 barrels of oil per day — about 17 percent of the nation’s production at the time. Today, Cushing is known for storage tanks instead of oil wells — and is home to huge farms composed of 250,000-barrel storage tanks that can collectively hold up to 77 million barrels of crude. Cushing, the self-proclaimed “Pipeline Crossroads of the World,” held 16 percent of all U.S. crude-oil inventories as of this past March.

What the locals say

“The group that is struggling the most is homebuilders who have gone out and pushed their inventories up to service [the high-end] segment and are now sitting on those homes because there are simply less buyers in that market. And [it’s] not just direct oil and gas jobs, but also affiliated positions [such as] self-employed guys that are running mud companies and trucking companies [and] professions around the exploration and production of oil and gas that are suffering.”

r_2017-12_Spotlight_local

Cody Hardridge  
Senior mortgage originator,
Cornerstone Home Lending Inc.  


 

Will McDermott is managing editor for Ask a Lender. Reach him at willm@scotsmanguide.com or (800) 297-6061.

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