The slumping oil and gas market has developers acting more consciously with their plans and consumers behaving more conservatively with their money across the Greater Houston area. However, pent-up demand from a growing population coupled with a limited housing and commercial real estate supply has helped make the Cy-Fair area more resistant to the downturn, experts say.

Since July 2014, the price of oil has dropped from $105 per barrel to below $30 per barrel in January. The drop in price will cause the energy industry to shed 19,000 jobs in the Greater Houston area by the end of 2016, according to the Greater Houston Partnership. Despite energy sector struggles, developers and real estate agents in Cy-Fair have expressed confidence in the market.

“If 2014 was a seller’s market, 2015 ushered in more of a level playing field,” said Rich Guderyon, a real estate agent with Better Homes and Gardens Gary Greene in Cypress. “I think buyers are scrutinizing houses more than they did in the frenzy last year. It actually helps our market a bit.”

Although developers are still building, the difficulty in forecasting long-term effects has provoked some caution among members of the business community, said Leslie Martone, president of the Cy-Fair Houston Chamber of Commerce.

“We have not seen a slowdown in terms of what developers are spending,” she said. “I think people are still being cautious with their spending, but our chamber is still seeing great support.”

Diversity is key

Patrick Jankowski, senior vice president of research at the GHP, said the Greater Houston area’s economy is more diverse than it was during a similar oil downturn that took place in the 1980s, which should ward off the kind of economic collapse that occurred then. The eight-year slump caused the Bayou City to lose 1 of every 8 jobs three decades ago, according to the Houston branch of the Federal Reserve Bank.

Other industries, such as health care and retail are still growing rapidly and will limit the damage from the energy downturn, local developers said. The health care sector has added 48,300 jobs over the past five years and is projected to add 9,000 more in 2016, according to the GHP. 

In Cy-Fair, health care facilities are cropping up along major corridors, such as Hwy. 290 and Hwy. 249, to accommodate communities in unincorporated northwest Harris County. Among the new developments is a  Memorial Hermann Cypress hospital and convenient care center, which the system broke ground on in the Fairfield area in February.

The strength of the health care market and overall diversity is a good sign for the future of real estate, said Trendmaker Homes President Will Holder.

“The damage will be done and the reset will occur, but we have so much momentum with our port and hospitals—there are hospitals under construction all over the suburban areas and an enormous [number] of health care jobs,” he said. “I think also that the [Houston economy] is sturdier and has a better center of gravity than it did at the beginning of the recession in 2008.”

However, Houston’s economy is still intertwined with oil and gas as 1 in every 25 jobs in the Greater Houston area is directly related to the industry, Jankowski said. A large number of jobs are indirectly tied to the oil and gas industry as well, he said.

“The act of digging a well permeates the entire Houston economy,” Jankowski said. “The engineers and manufacturing workers are going to shop in grocery stores, eat out at restaurants—it extends to them as well.”

Class A loses steam[polldaddy poll=9280019]

Two industries that have seen some negative effects of the oil and gas downturn in Cy-Fair are hotels and Class A office space. Both markets are expected to rebound before serious consequences set in, according to experts. An office market report released at the end of 2015 by real estate firm Colliers International shows Class A office vacancy rates rising in suburban Houston markets. Vacancy rates hit 16 percent, up from 10 percent at the end of 2014.

“There’s been a pullback when it comes to some of the larger office spaces—because those are what energy companies primarily use—but there is still a lot of commercial activity,” said Randy Connell, a Realtor with Cy-Fair based Connell Team Realty, which specializes in retail and office sales. “The Cy-Fair market is still being driven by the limited supply and residential trends, both of which show the need will be there.”

Meanwhile, Cy-Fair hotel occupancy rates and revenue generated per room are both projected to fall in 2016, according to Randy McCaslin, managing director of PKF Consulting in Houston. Occupancy rates are expected to drop to 60 percent, down from 70 percent in 2014, and daily revenue per room is expected to drop to $55.20 per day, down from $66.08 per day in 2014.

McCaslin said this downturn is likely caused by the oil and gas industry and should be short-term. He said he expects demand to be healthier by fiscal year 2018-19.

“The hotels being built in [Cy-Fair] are needed because of the population increase, but the demand is dropping because of oil prices,” McCaslin said.

Real estate forecasts

Average and median home prices rose in all Cy-Fair submarkets from 2014 to 2015, according to data from Houston Area Realtors' Multiple Listing Services. However, total home sales declined slightly in all markets aside from FM 1960/Cypress. \Cypress North, Cypress South and Copperfield submarkets all saw drops in total sales of more than 70 homes, with the most pronounced effect taking place in Cypress South, which fell from 1,384 homes sold in 2014 to 1,303 homes sold in 2015.  

The real estate industry could be among the most heavily affected for the Greater Houston area, according to the GHP.

Houston-area Realtors sold 10 percent fewer homes in November than in the same month in 2014, according to the Houston Association of Realtors. At that same time, the manufacturing industry lost 17,200 jobs in the Greater Houston area through the first 10 months of 2015, according to GHP.

“That effect is already starting,” Holder said. “There are [real estate] developers that are postponing the development of certain lots that will put those in next year instead of this year. I think the biggest change will be that we slow down delivery of new homes and lots to match the market.”

Holder also said he expects the real estate market in the Greater Houston area to shrink over the next two years from about 25,000 new homes built per year to about 18,000 per year. Although net job creation and home purchasing is directly linked, he is confident the market will not dip below 18,000 new homes because there are still many potential homebuyers.

Trendmaker Homes sells homes in a three Cy-Fair communities in the Fairfield area: Fairhaven Estates, Lakes of Fairhaven and Fairfield itself.

“There are a lot of people in rental homes right now,” Holder said. “These people are not going to rent forever. They’re going to unfold out into the marketplace over the next 24 months.”