Economist sees silver lining in housing market

The Houston economy faces a period of adjustment as the energy and manufacturing industries shrink while restaurants and retail businesses contend with fewer customers and lower sales volumes as the coronavirus keeps people out of stores and dining establishments, a local economist said Tuesday.

The bright spot is the residential real estate market as the record low mortgage rates drive sales, benefiting both buyers and sellers, said Patrick Jankowski, an economist at the Greater Houston Partnership, a business-finance economic development group.

The Houston economy in recent months has taken a double hit from the pandemic that shut down businesses and a related oil price crash that followed a plunge in energy demand as air travel plummeted and people stayed home. Even as retailers and restaurants have recovered jobs with the reopening of the economy, layoffs continue across oil and gas companies and manufacturers.

The local oil and gas industry, including services, has lost nearly 20,000 jobs over the past year while manufacturers have shed 22,000, according the most recent employment statistics. The loss of manufacturing jobs is connected to the oil and gas industry, Jankowski said.

The number of active oil drilling rigs in Texas and across the country are near record lows, down more than 70 percent from a year ago, according to the Houston oil field services company Baker Hughes.

“When you see the rig count fall so much,” said Jankowski, speaking at a virtual event sponsored by the Greater Houston Partnership, “the oil and gas industry isn’t going to be ordering any new equip

ment.”

The Houston area has some 226,000 fewer jobs than it did at the beginning of year, according to employment statistics. The unemployment rate in July — 9.4 percent — more than doubled from 4.1 percent a year earlier.

Not all bad

But it’s not all bad news, Jankowski said. Restaurants and bars have recovered nearly 58 percent of the

101,800 jobs they lost during government ordered shutdowns in March and April. Restaurants, however, are operating at a limited capacity and bars were shut down again this summer by Gov. Greg Abbott following a surge in coronavirus cases.

The housing market has been a particular bright spot — a sign of optimism in the longer-term. Houston homebuyers closed on nearly 11,000 homes in July, a surge of 23 percent, according to the Houston Association of Realtors.

“People feel like their

employment situation is OK, and they’re willing to make a commitment,” Jankowski said. “It’s a sign that it’s not all negative, and there is some hope.”

The outlook, however, is not as hopeful for commercial real estate as retailers go bankrupt and storefronts stay empty, Jankowski said. Most recently, the department store chain Stein Mart filed for bankruptcy earlier

this month and said it would close and sell its more than 270 stores, including several in Houston.

“The concern is how much retail space will be thrown back onto the market when all these stores that have declared bankruptcy are closing,” Jankowski said. “Not a lot of people can step in and fill these big box stores.”

The office market is also

struggling, with a rate of 21.6 percent in the second quarter, according to commercial real estate firm CBRE.

Home front

Jankowski said it’s difficult to determine how the pandemic will affect the office market over the long term. On the one hand, if an employer wants to maintain an office, they would need additional space to follow social distancing protocols.

On the other hand, many companies might just continue to have employees work from home, meaning they’ll need far less office space — if any.

“Most people found they like working from home,” Jankowski said, “and employers realized it worked.”