The oil and gas "boom-to-bust" prediction is hitting Texas harder than expected. So far, state tax revenues are down and a new report warns: Austin’s housing bubble may soon pop because of the downturn in the oil patch.
Construction cranes are still part of Austin’s skyline. An indication of good economic times. That boomtown promise is one of the reasons why Kamille Robertson moved to Texas.
"Everything is kind of established, I was just in LA, so everything is established here and I think that in Austin you can kind of make room for yourself so I’m trying to get in and make room for myself,” said Robertson.
But in the Texas Oil Patch high rise drilling platforms no longer dominate the horizon. It's why some analyst warn an economic domino effect may soon be felt in urban housing markets.
According to a report issued by arch mortgage insurance co. Homes in Texas are overpriced. As a result- the state is among those considered to be at risk for a price decline over the next 2 years. But the report concludes Austin's moderate risk status makes it one of the top metropolitan areas for a housing bubble bust. Jacques Deysel is hoping for that, he currently can’t afford to buy a house in Austin.
“With the renters market also going up, everything is inclining, so hopefully a pop, like you said, is happening soon because I’d definitely would be interested in a house,” said Deysel.
If there is a housing price correction it may not be big according to Arch Mortgage Insurance. Compared to other energy producing states the risk in Texas is considered to be the lowest.
The downside to a downturn is already being felt. Back in October the Comptroller’s Office made adjustments to the revenue estimates for the new budget.
A year ago, Comptroller Glenn Hegar offered what he considered to be a conservative projection. But so far- tax revenue has failed to hit the mark. Expected drops in the oil and gas sectors are deeper than predicted. Hegar originally estimated state lawmakers would have $113-billion for the new budget. He adjusted that down to $110 billion, which it’s still higher than the $106 billion lawmakers actually allocated.
"Panic is not called for,” said Bill Hammond with the Texas Association of Business.
Hammond isn’t hitting a panic button because the state rainy day fund is expected to have several billion dollars in it.
"So worst case scenario I think the state of Texas and tax payers will be protected by those reserved funds that are available,” said Hammond.
The one big budget loser in the downturn may be money pulled out of the Rainy Day Fund to pay for new road projects. The amount for 2017 may be reduced by half.
When asked if Governor Greg Abbott was considering an order for state agencies to cut spending, a spokesman for Governor Abbott said;
"The Governor hasn't taken any action at this time, but is closely monitoring the situation."
Energy analysts Marshall Adkins is also watching, waiting and expecting a rebound.
"Things are going to suck for another six months. It's not good out there, but this business, I think, has an incredibly bright future once we get past the next six months," said Adkins.
The wait and see approach may be influence by a ship that sailed last week out of Corpus Christi. It was loaded with the first shipment of exported oil from Texas in 30 years. The tanker’s launch is an indication that calmer economic seas for Texas may be ahead.