Home Prices Shoot Up in West Texas as Oil Activity Barrels On

[Editor's Note: This is the second installment in a three-part series exploring the working and living conditions for employees in the Permian.]

In 2004, Todd Green and his wife purchased a home in Midland for $80,000. In 2008, he received an international assignment with his employer Aramco and moved his family to Saudi Arabia. Their home sold for $160,000. In just a few years, he saw his property value double.

“That same house now would probably sell for $260,000 or $300,000,” Green told Rigzone. “Midland now is crazy inflated.”

Green is referencing the latest shale oil boom that has created a spike in activity in the Permian Basin and caused an influx of workers to move to West Texas. It’s also contributed to rising home prices as the housing market transitioned into a seller’s paradise.

The latest numbers, from June 2018, show Midland’s median home price at $300,000 – up 15.4 percent from a year ago. Additionally, Midland has 1.3 months of inventory, compared to 2.3 months a year ago. During the thick of the oil and gas industry downturn in early 2016, a Midland realtor told Rigzone the Midland housing market had 3.5 months of inventory.

 

And just a stone’s throw away down Interstate 20 lies Odessa, another city that’s part of the Permian Basin. Odessa’s housing market has experienced similar changes to neighboring Midland.

“With our shale boom and the frac sand, everybody’s coming here to work,” Wayne Dunson, broker associate with Steve Oliver Realtors in Odessa, told Rigzone. “Odessa had 6.5 months of inventory about a year-and-a-half ago.”

In May 2018, Odessa had just 1.4 months of inventory.

“It’s definitely a seller’s market – no doubt about it,” Dunson said.

Odessa’s median home price in May 2018 was 199,900 (up 19.7 percent compared to May 2017) with 173 active listings, a 56.8 percent decrease.

“The median price for homes in Midland is going to be at least $100,000 higher than the homes in Odessa, partly because the median income per capita is higher in Midland,” Dunson explained. “The reason is a lot of the oilfield majors’ offices are headquartered in Midland.”

Odessa has a larger sector of blue-collar workers, said Dunson, adding that Odessa’s median income per capita is less and homes are more affordable.

Dunson said he currently has three townhomes under construction for engineers who work for oil companies based in Houston. The desert-esque Permian is a lot different from the bustling Houston scene, but, as the engineers put it, “West Texas is where the money is.”

“A couple of them have maintained their homes in Houston, so they’re buying low-maintenance townhomes here … they come here to work during the week and return home on the weekends,” Dunson said. “They’re just planning on selling or renting them out whenever things slow down or move somewhere else to work … I [recently] sold houses here to a set of twin brothers from North Dakota who are moving here with their oil company. They’re just following the paychecks.”

But not everybody’s buying. Due to low home inventory and high prices, some oil workers are forced to rent.

In 2013, Green and his brother purchased an investment property, a modest four-unit complex in a not-so-nice side of town in Midland. They were able to rent it out right away.

“They’re 1,000 square feet per unit and I was probably asking about $850 per month per unit,” Green said. “Now I’m getting about $950 per month.”

One of the units Green rents out houses three men who work in the oilfield.

“They’re just sleeping at the place whenever they’re not in the field,” he said.

Green said some efficiency apartments in Midland are going for about $1,500 per month and though he could ask for $1,200 per month for each of his rental units, he decided not to gouge people. Instead he raises his rent just enough to cover the increase in taxes and insurance year on year.

“Before I decided to take the job with Aramco, I was offered an opportunity to work in Midland for a small company … the compensation packages were similar, but the cost of living in Midland is what swayed me to stick with Aramco,” he said. “As much as the oil companies make, you would think they would somehow help the city plan, subsidize, something …”

Green, who has worked previously as a teacher in the Dallas/Fort Worth area, said he has several friends who taught in Midland that chose to leave recently.

“They just couldn’t afford it,” he said.

Green said he personally doesn’t ever plan on living in Midland again but does plan on keeping his rental properties (he bought out his brother’s portion after he decided to pursue other work).

“I’ve actually had somebody offer to buy it for close to 50 percent more than what it’s worth,” he said. “But it would be stupid to sell it now.” 

Housing in the Permian Basin