Oil jobs boom in Texas

Oil collapse threatens the housing boom in Texas

The construction of houses in the state could drop 20% because of the decline in the energy sector; oil companies are laying off thousands of employees to the low oil prices.

NEW YORK - Houston, you may have a housing problem. Texas is the heart of the US energy industry, which is currently under siege from the collapse of oil prices.

The days of $ 100 oil perhaps gone for ever and that means oil companies are cutting oil jobs; thousands of them.

That's scary for the local real estate industry, which had maintained a constant rate over recent years thanks in part to booming energy business in the state. Credit Suisse believes that housing construction could fall 20% this year.

"Offshore oil Job growth is one of the most important engines for housing, employment and income growth and generate local demand and an increase in population due to the relocation," he wrote this week in a research report the Credit Suisse analyst Michael Dahl. oil job cuts 'inevitable'

Last month, when oil was trading at around $ 60 a barrel, Dallas Federal Reserve warned that employment in Texas could sink into 125,000 oil jobs during the first half of 2015. Now that oil has fallen below $ 45, this estimate may be optimistic.

A number of major energy companies based in the border state have recently announced oil job cuts, including 7,000 of 9,000 Baker Hughes and Schlumberger. Not all of these oil job cuts will take place in Texas, although it is easy to see that at least some of them do.

"The slow oil job growth is inevitable," Dahl wrote. JPMorgan went so far as to predict that the state could fall into a recession.

Effects on the housing market

In the not too distant past, Credit Suisse predicted a strong growth of up to 14% in the homebuilding industry in Texas. Now the bank predicts a fall of 20% due to "ripple effects" caused by oil job losses and reduced confidence due to energy descent.

That would represent a radical change for Texas, which enjoyed a 7.5% jump in permits for single-family homes in 2014, easily surpassing the tepid growth of 0.5% nationally.

Lennar, a home builder with a strong presence in the state, said that so far only being registered some decline in the top end of the market. But is preparing for more problems in the future.

"We're smart enough to know that if oil prices remain depressed, there will be some negative reaction in the market," he said Lennar CEO Stuart Miller said during a conference call last week. 1980 again?

There is a history of oil collapses occurred in the real estate market of the Lone Star state.

When oil prices plummeted 50% in the 1980s, housing prices fell 14% from their peak, according to JPMorgan. Houston was hit particularly hard; housing there sank 75%, Credit Suisse said.

However, Houston is not as dependent on oil and gas world as it was before. It has attracted workers from other industries, such as medicine, finance, technology and education.

"The number of oil jobs created and the people who move to Houston is very large compared to the 80s," said Scheri Fami, president of John Daugherty Realtors, provider of the luxury market.

So far, Fami said his company is not seeing signs of slowing.

Avoid builders

For now, Credit Suisse is telling investors to stay away from home builders with a strong exposure to oil markets approach as Houston, Dallas, San Antonio, Austin and Denver.

Earlier this week the bank issued a sell recommendation Pulte Homes, Meritage Homes and Ryland Group. Shares of the three builders have fallen so far this year.

"I feel the urgency to own (actions) any manufacturer at this time," Dahl wrote.

Texas, the capital of the oil boom and collapse

The state has witnessed cycles in the market, as it has now sunk prices; the Texas oilmen had prepared their finances, to anticipate the end of the boom.

New York - Until a few months ago, things were going successfully in Texas. Now, with oil dropping below the mark of $ 45 a barrel, there is a legitimate fear that the state falls into a recession.

Although the turnaround in the lone star state is dramatic, oil Texans veterans are well acquainted with the cycle of boom and bust.

For most of the last century, Texas experienced the euphoria of high prices, along with suffering from low prices.

Denise Walker still hurt just thinking about the fall in oil prices that forced it to close its oil service company in Texas in the mid-1980s.

"I've been there. Not fun, but simply must learn to survive, "Walker said.

Back in the oil business after a stint in livestock, Walker now faces an environment that feared to be even worse than 30 years ago.

"I think we'll be fine. because we learned from our mistakes," he said.

Walker, now co-owner of the oil services company Frontier Services, learned to keep cash on hand and avoid filling debt to pay for the equipment.

"I had to go out and start doing the work myself," Walker said. "I'm older now. I do not want to, but I will if I have to. I'll wear a hard hat, steel-toed boots and do the oil job. It is not beneath me. " Preparing for the worst

In 2008, Doug Fusilier lost his oil job at GE Oil & Gas when oil fell from nearly $ 150 a barrel to below 35 dollars amid the financial crisis.

He could not find another tanker work and eventually took a position in the coffee industry. Stress and lack of sleep eventually caused him health problems.

"Anyone who has not been in this business and think it will always be a frantic -always success earning $ 150,000 a year-has not been here long enough to know that there may come a time when you can not find anything "Fusilier, a veteran of 20 years in the industry said.

Now he is back, working as a designer at FMC Technologies, another oil services company.

Although he believes that FMC "should be fine for a while," thanks to a large backlog, have family and friends who are facing oil job losses and declining wages.

Fusilier and his wife began to prepare for the bad months to pay their debts. "If it lasts longer than expected, we have to be prepared," said Fusilier.

"When things are at their best and brightest, that's when you should start preparing for the worst. When everyone says that will not end, that's when it will end, "he said.

Although the oil crisis is causing nervousness in Texas, Danny Jimenez knows that dramatic price movements also represent opportunities.

"A drastic decline in prices of raw materials will result in winners and losers. The weak get weaker and the strong get stronger, "Jimenez, who is chief executive Craig Energy, an oil services company based in Denver said.

Jimenez, who previously worked in companies Texas-based Halliburton and Schlumberger, said that oil companies are financially irresponsible and believe that good times "are going to last forever," will be in trouble.

"You must stay within your means so you do not push too hard," Jimenez said.

Employees who are entering the oil industry would benefit from remembering the history of boom-bust cycles in Texas.

"Honestly, this dramatic fall in prices is something that many of us felt that it was inevitable," said an oil industry geologist of Texas who requested anonymity.

He referred to a long history of technological advances that led to excess supply and falling prices. The same is true of the current boom in shale.

All this explains why pursue higher wages is risky, leveraged businesses can become counterproductive.

"Those who pursue dollars tempting sometimes end up taking the decision to work for a company that looks great with oil at $ 100, but are candidates for bankruptcy with oil at $ 40," he said.