Copyright© 2016 Fannie Mae 1

Multifamily Market Commentary – April 2016 

Energy Metros and Low Oil Prices – A New Normal?

In mid-2014, a dramatic fall in oil prices brought a shock to global economic markets. Conditions stabilized with a modest 

price recovery through the first half of 2015, but by year’s end we saw a repeat of 2014. The cause of the most recent 

decline was generally the same as the cause of the initial slump. An increase in North American oil production coupled 

with continued high levels of output from the traditional oil-producing nations was met by a slowdown in demand from 

China and a lackluster world economy, producing a global oil supply glut. 

This time around, however, oil prices are not expected to rise dramatically anytime soon. The general consensus is that oil 

prices will recover modestly in 2016 – from a current price of about $40 per barrel – and perhaps rise to $50 per barrel over 

the next 12 to 24 months. Prices below $60 levels present more of a problem for North American producers than foreign 

producers, because the cost of extracting oil in North America is generally higher than in traditional oil-producing nations. 

While lower oil prices may make many commuters happy, they do raise concerns for some parts of the economy – including

U.S. multifamily investors. Declining investment in oil exploration and a contraction in the number of oil-producing rigs have 

brought job losses, and they present a high likelihood of more losses to come.

What Happened to Energy Metro Job Markets in 2015?

Nationally, job market growth slowed slightly from 2.1 percent in 2014 to 2.0 percent in in 2015, according to Moody’s 

Analytics. Houston, the metro with the largest energy-centric economy in the country, saw a more pronounced slowdown, 

though it did not experience net job losses. As the chart below shows, its total job growth declined to 0.9 percent in 2015

from 3.7 percent in 2014.

Moody's Annual Job Growth (Historical and Forecast) - Select Energy Metros

Among the larger energy metros, only Tulsa experienced a net job loss in 2015 – a slight 0.1 percent decrease. Smaller 

energy metros, however, felt a greater impact. As the table on the next page shows, Lafayette, LA, lost the highest number 

of jobs among metros with a concentration of mining jobs. But many metros with mining job concentrations – including 

Houston, Dallas, and Oklahoma City – actually managed to post positive job growth results despite the impact of falling oil 

prices late in the year. Of the many cities whose job markets did weaken in 2015, only a small number have larger-thanaverage apartment markets. Nationally, about 18 percent of housing units are in buildings with five or more units. The table 

on the next page shows that only eight of the 50 metros with mining job concentrations have an above-average concentration 

of multifamily housing units.

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Dallas-Fort

Worth

Denver Houston Midland-Odessa Oklahoma City Pittsburgh Tulsa United States

2012 2013 2014 2015

2016 2017 2018 2019

Source: Moody’s Analytics
2

Metro Area Total Mining Total 5+ Units

Midland, TX 97.9 25.2 25.7% 99.6 1.7% 1.6 60.2 10.9 18.1%

Odessa, TX 81.2 13.1 16.1% 82.9 2.2% 1.8 56.5 11.1 19.6%

Farmington, NM 53.3 7.3 13.8% 52.4 -1.6% (0.9) 49.6 1.6 3.2%

Casper, WY 42.9 4.7 10.9% 41.9 -2.4% (1.0) 35.8 5.0 14.0%

Lafayette, LA 222.0 23.6 10.6% 217.0 -2.3% (5.0) 201.9 20.0 9.9%

Victoria, TX 45.2 4.5 9.9% 46.3 2.4% 1.1 39.7 4.8 12.1%

Greeley, CO 101.1 9.4 9.3% 105.0 3.8% 3.8 100.1 11.4 11.4%

Wheeling, WV 68.6 6.0 8.7% 68.3 -0.4% (0.3) 69.1 6.0 8.7%

Longview, TX 105.0 7.8 7.4% 105.7 0.6% 0.7 89.5 6.7 7.5%

Houma-Thibodaux, LA 101.5 7.0 6.9% 98.5 -2.9% (3.0) 84.2 4.7 5.6%

Beckley, WV 47.4 2.8 6.0% 47.4 0.1% 0.0 57.5 3.2 5.5%

Grand Junction, CO 61.7 3.4 5.5% 61.6 -0.2% (0.1) 63.8 5.3 8.3%

Corpus Christi, TX 196.8 9.0 4.5% 199.9 1.6% 3.1 187.5 24.8 13.2%

Williamsport, PA 56.5 2.4 4.3% 54.8 -3.1% (1.7) 52.6 4.7 8.9%

Bakersfield, CA 260.9 10.5 4.0% 262.4 0.6% 1.5 291.5 27.4 9.4%

Fairbanks, AK 38.5 1.5 3.9% 38.6 0.1% 0.0 41.7 5.8 13.8%

Houston, TX 2,968.5 113.3 3.8% 2,996.0 0.9% 27.4 2,441.2 645.2 26.4%

Charleston, WV 123.6 4.6 3.7% 122.8 -0.6% (0.7) 107.5 10.3 9.6%

Wichita Falls, TX 58.3 2.1 3.6% 57.2 -2.0% (1.2) 65.3 6.8 10.4%

Oklahoma City, OK 623.0 22.7 3.6% 633.2 1.6% 10.1 557.4 83.0 14.9%

San Angelo, TX 49.1 1.8 3.6% 49.1 0.1% 0.1 48.6 7.5 15.4%

Abilene, TX 68.6 2.2 3.2% 69.0 0.6% 0.4 70.5 8.5 12.1%

Laredo, TX 99.3 3.2 3.2% 101.3 2.1% 2.1 78.1 10.4 13.4%

Tuscaloosa, AL 103.7 3.2 3.1% 106.1 2.4% 2.5 104.4 20.7 19.8%

Shreveport-Bossier City, LA 183.8 5.3 2.9% 181.5 -1.2% (2.2) 198.6 23.7 11.9%

Tyler, TX 99.2 2.8 2.8% 99.8 0.6% 0.6 88.4 10.6 12.0%

Duluth, MN-WI 134.5 3.6 2.7% 135.5 0.8% 1.0 141.9 15.8 11.1%

College Station-Bryan, TX 105.7 2.7 2.6% 106.7 0.9% 0.9 100.1 20.0 19.9%

Fort Smith, AR-OK 113.2 2.6 2.3% 112.0 -1.1% (1.2) 123.0 10.0 8.2%

Prescott, AZ 60.5 1.4 2.3% 61.7 1.9% 1.2 112.5 6.0 5.3%

Anchorage, AK 180.2 3.8 2.1% 181.5 0.7% 1.3 155.6 22.4 14.4%

Tulsa, OK 443.5 8.8 2.0% 443.1 -0.1% (0.4) 421.1 60.8 14.4%

Carbondale, IL 54.8 1.1 2.0% 53.9 -1.6% (0.9) 59.4 7.9 13.3%

Amarillo, TX 116.6 2.1 1.8% 117.5 0.7% 0.8 107.5 14.2 13.2%

Pine Bluff, AR 34.1 0.6 1.7% 31.7 -7.0% (2.4) 42.6 4.3 10.0%

Terre Haute, IN 70.5 1.1 1.5% 70.0 -0.7% (0.5) 73.9 7.5 10.2%

New Orleans, LA 564.5 8.3 1.5% 563.7 -0.1% (0.8) 553.4 82.9 15.0%

Morgantown, WV 69.8 0.9 1.3% 69.3 -0.7% (0.5) 59.5 9.9 16.6%

McAllen-Edinburg-Mission, TX 245.0 3.1 1.3% 251.4 2.6% 6.5 261.2 21.3 8.1%

Parkersburg-Vienna, WV-OH 42.8 0.5 1.3% 42.7 -0.3% (0.1) 43.3 2.7 6.3%

Beaumont-Port Arthur, TX 168.4 2.1 1.2% 173.1 2.8% 4.7 174.7 24.3 13.9%

Lake Havasu City-Kingman, AZ 46.6 0.5 1.2% 46.0 -1.4% (0.6) 112.3 6.7 5.9%

San Antonio, TX 959.0 10.8 1.1% 994.7 3.7% 35.8 862.0 165.3 19.2%

Dallas-Fort Worth-Arlington, TX 3,326.0 37.4 1.1% 3,429.2 3.1% 103.2 2,645.5 662.2 25.0%

Denver-Aurora-Broomfield, CO 1,362.7 15.3 1.1% 1,390.9 2.1% 28.2 1,114.1 295.7 26.5%

Pittsburgh, PA 1,164.5 11.8 1.0% 1,178.0 1.2% 13.5 1,106.0 138.0 12.5%

Elmira, NY 39.2 0.4 1.0% 39.1 -0.2% (0.1) 38.4 3.7 9.5%

Hanford-Corcoran, CA 37.6 0.3 0.8% 37.8 0.7% 0.3 44.9 4.6 10.2%

Huntington-Ashland, WV-KY-OH 141.0 1.2 0.8% 141.1 0.1% 0.1 165.6 13.0 7.8%

Johnstown, PA 57.5 0.4 0.6% 56.8 -1.3% (0.7) 65.3 5.4 8.2%

Multifamily 

(5+) % of 

Total Units

2014 Total Jobs 

(000s)

Mining % 

of Total 

Jobs

2015 Total 

Metro 

Area Jobs 

(000s)

2014-15 

% 

Change

2015 Net 

Job 

Change 

(000s)

2014 Housing 

Units (000s)

Change in Total Job Market Among Metros with Mining Job Concentrations - 2015

Source: Moody's Analytics, Bureau of Labor Statistics, per Fannie Mae’s Economic & Strategic Research Group – metro areas include 

coal mining concentrated MSAs
3

National Outlook – Pain in Energy Metros, Steady National Economy

Moody’s expects national job market growth to slow moderately in 2016 – to 1.7 percent, down from 2.0 percent for 2015. 

Even so, as they did last year, low oil prices should provide a net benefit to the national economy. They provide consumers 

with more disposable income every time they go to the gas pump. And in the business sector, low oil prices reduce operating 

costs and create a more profitable industrial production process.

Moody’s expects oil prices to rise modestly during 2016. However, it says that if prices stayed at the $35-a-barrel level, the 

national economy would actually produce 280,000 more jobs this year than if prices rose modestly. Using the general ratio 

of five new jobs producing demand for one additional apartment rental unit, lingering $35 per barrel oil prices could possibly

increase the demand for new apartments nationally by as many as 56,000.

Despite Diversification, Impact on Energy-Dependent Regions Still Negative

Nevertheless, persistently low oil prices would certainly have a negative impact on several energy-dependent economies 

around the country. But it is important to recognize that today’s energy markets are not the same places they were during 

the oil bust of the 1980s. Since then, the national economy has diversified in many important ways, and so have these 

metros.

As the table above shows, all of the states except North Dakota have seen a significant decrease in the portion of their jobs 

that are in the mining sector – which includes oil exploration and extraction, and the mining of coal and other natural 

resource, but not office support services and equipment manufacturing. 

Taking a closer look at Houston – the nation’s energy capital – shows that it too has seen a significant decrease over the 

past three decades in the importance of oil to its overall economy. For example, in 1982, mining and manufacturing jobs 

(including non-oil and energy-related jobs in those sectors) accounted for a combined 20 percent of Houston’s job market. 

At the end of 2013, that portion was just 12.5 percent. More importantly, Houston can expect continued diversification over 

the next decade. And Houston is not alone. Dallas has seen an even more pronounced change in its local economy. In 

1982, mining and manufacturing jobs accounted for 21 percent of the jobs in the Dallas metro. By 2013, they had declined

by more than half, accounting for just 9.1 percent.

Overall, Texas has managed to slog through the fall in oil prices better than would have been expected. In 2015, total job 

growth in the state was 1.5 percent, only slightly below the 2.0 percent national rate. Texas still has very solid demographics 

supporting its housing markets. Its population grew 1.8 percent in 2015 – well above the 1.0 percent national average. 

According to Moody’s, home prices are rising in all of the state’s major metro areas.

In Louisiana, by contrast, low oil and natural gas prices have weakened economic conditions. In 2015, while regional 

construction kept Baton Rouge steady, job markets were weak in Shreveport and Lafayette, though not as weak as in 2014. 

Change in Mining Share of State Payrolls 1982 vs. 2014

Source: Bureau of Labor Statistics, per Fannie Mae’s Economic & Strategic Research Group
4

Lafayette’s economy swung from a 2.5 percent contraction in 2014 to a net gain of 1.0 percent in 2015. Shreveport saw

more significant trouble in 2013 when natural gas prices declined precipitously and its economy contracted by 5.8 percent. 

The area managed to find its way back to positive territory in 2015 when it experienced 2.0 percent economic growth. The 

economies of both metros – as well as the state’s – is expected to continue to lag in 2016.

Houston – Softening, Not Collapsing

Houston is among the metros that will likely be seeing new multifamily housing supply increase significantly in 2016, just as 

its economy slows noticeably from recent trends. Planning for these new developments occurred when Houston was 

growing at twice the national average, and before declining oil prices took their toll. As a result, Houston should expect to 

see softening of its apartment market. This year, it is expected that Houston will have no appreciable rent growth and its 

vacancy rate could potentially increase by 200 basis points. 

Houston was already poised for a slowdown this year – even before falling oil prices muted prospects for the metro’s job 

market. Now, a surge in new rental supply will be coming online at a time when there is weaker-than-expected market 

demand. Once these conditions subside, Houston’s multifamily market is expected to start growing again – but that should 

occur further out in the forecast, as noted the chart above. 

Oklahoma – Slowing but Not Breaking

Oklahoma’s two largest metropolitan areas – Tulsa and Oklahoma City – both benefitted from the oil boom, but Tulsa felt 

more pain from 2015’s drop in oil prices than Oklahoma City. Job growth plummeted to essentially zero last year in Tulsa 

from a quite healthy 2.3 percent increase in 2014. In Oklahoma City, by comparison, the slowdown was modest, with job 

growth falling slightly to 1.6 percent from 1.8 percent in 2014. The apartment markets in both metros are expected to remain 

fairly stable – with a slight increase in vacancies and positive, though slightly slower rent growth, as noted in the charts 

below. While the two metros face more modest growth in oil and mining jobs going forward, both are expected to see their 

education, health and professional and business services jobs grow at above national average rates over the next five 

years, supporting apartment demand.

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

CBRE-EA

REIS

CoStar

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

CBRE-EA

REIS

CoStar

Houston Annual Asking Rent Growth (Historical and Forecast)

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

CBRE-EA

REIS

CoStar

Source: CoStar, CBRE Econometric Advisors, and REIS

Source: CoStar, CBRE Econometric Advisors, and REIS

Tulsa Annual Asking Rent Growth

(Historical and Forecast)

Oklahoma City Annual Asking Rent Growth

(Historical and Forecast)
5

Midland-Odessa – The Worst May Be Over

Midland-Odessa – probably the largest beneficiary of the Texas oil drilling boom – experienced exceptional job growth in 

2012 through 2014. New jobs grew at astounding double-digit rates during the period, before the market came back down 

to earth in 2015. While the metro did not sustain a net loss in jobs, job growth was down significantly – falling from an eyepopping 8.9 percent in 2014 to a still very respectable 1.9 percent in 2015. According to Reis, Inc., this has resulted in a 

stunning rise in vacancies. From a low of less than 3.0 percent in 2012, the vacancy rate soared to just over 10 percent by 

the end of 2015. Rents have been volatile, but have not declined dramatically. Reis estimates that rents grew more than 20 

percent in both 2011 and 2012. In 2015, they contracted by approximately 5.0 percent.

The good news for Midland-Odessa is that the worst is probably over. A dramatic decline in oil prices brought similarly 

dramatic change in the local economy, but further deterioration should only be minor. Moody’s forecasts that the area could 

have 0.9 percent job growth in 2016, and 2.0 percent the following year. While these levels may be disappointing, the area’s 

exceptional growth of 2012 through 2014 was unsustainable over the long term. However, even if low oil prices persist for 

more than three years, Moody’s expects the area’s job growth rates to exceed the national average, although at a much 

slower pace than in the earlier period, as noted in the chart below.

North Dakota Adjusting to Its New Normal

North Dakota continues to adjust to the new reality of oil prices below $40 a barrel. In 2016, more than anywhere else in 

the country, the state is expected to feel the pain of exploration and drilling job losses. As of early March 2016, there were 

just 32 exploration and production rigs operating in the state – compared to more than 200 as recently as 2012. As of this 

March, rigs in operation were down 70 percent from a year earlier. The number of jobs in North Dakota contracted by 1.6 

percent in 2015.

The largest cities in North Dakota – Bismarck, Fargo, and Grand Forks – all reported positive job growth for 2015. That puts

the primary oil metro in the state – Williston – on the receiving end of the largest negative fallout. Axiometrics, Inc. estimates 

that asking rents in Williston fell by more than 34 percent in 2015, as the occupancy rate plummeted 10 percentage points

to 84 percent. Without a significant recovery in oil prices, it is likely that Williston – along with most of North Dakota – will 

continue to languish for the next several years.

Oil exploration activity is not significant in Fargo, which is the most populous area of the state. But the metro has definitely 

experienced the impact of falling oil prices. Fargo’s apartment market has felt the pain acutely, though it possibly has seen 

the worst. Reis reports a rapid rise in the metro’s apartment vacancy rates – to 9.0 percent at the end of 2015 from a low of 

4.6 percent just two years earlier. Expectations are for only an additional one percentage point increase in the vacancy rate

over the next two years.

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Base Forecast

Prolonged Low Oil Prices

National Baseline

Midland-Odessa Job Growth (Historical and Forecast) (YoY)

Source: Moody’s Analytics
6

Many Metros Benefit from Low Energy Prices

As most people can appreciate, lower gas prices are a positive. And they’re not only positive for individuals, but also for 

many local economies. Low oil prices will likely provide an economic stimulus to metro areas that rely not on the energy 

sector, but on such industries as logistics, manufacturing, transportation, and tourism. For example, Orlando and Los 

Angeles would expect to see significantly stronger job growth through 2019 if oil prices stayed below $40 a barrel for the 

next three years. That could give their economies an additional 35,000 and 129,000 jobs, respectively – loosely translating

into possible demand for as many as 7,000 additional apartments in Orlando and as many as 25,800 additional apartments 

in Los Angeles. Most metros across the country whose economies will be stronger as the result of lower energy prices can 

expect to see increases in job growth and apartment demand.

Softening Conditions Nationally in 2016, Slightly Worse in Energy Metros

Nationally, the multifamily sector can expect to see some softening of fundamentals in 2016. Rent growth has been 

exceptionally strong since 2011. It has remained in the 3.0 percent range over the past two years, starting to slow down 

slightly in 2014. The expectation for 2016 is that rent growth will once again be positive, but that it will ease slightly into the 

2.5 to 3.0 percent range. A large amount of new supply should come online in 2016. Importantly, much of the supply will be 

concentrated in submarkets in about 12 metros. Healthy job growth should spur continued rental household formations, but 

there is no denying that the added apartment supply will likely produce an increase in vacancy levels, particularly in those 

submarkets across the country where it is concentrated.

Continued low oil prices are likely to be painful in a few places, but a welcome stimulus in many others. It’s true that we did 

not see a dramatic increase in consumer spending nationwide in 2015 as a result of lower oil prices. But we also didn’t see 

any cataclysmic eruptions in the economies of energy-focused metros. This state of relative equanimity is expected to 

continue in 2016 for the national economy, local economies, and apartment markets. A rising vacancy rate and softening 

rate of rent growth is expected for the national apartment market, after consecutive years of extremely tight vacancies and 

an extended period of unabated rent growth. Energy-focused markets will obviously experience softening as well. Although 

most have seen the majority of the job losses to be expected during this phase of the oil cycle, weaker-than-expected job 

creation and housing demand should somewhat exacerbate results in their apartment markets.

The question is, how long will the oil glut last and how will it affect the economy? If oil prices would remain at around $40

per barrel for the next three years, there would likely be a disproportionate impact on Houston, one of the nation’s largest 

metros. And many of the smaller energy metros would likely endure a prolonged contracted economy. The rest of the nation 

would probably benefit, making many consumers, and especially commuters, quite happy.

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0% Base Forecast

Prolonged Low Oil Prices

National Baseline

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

Base Forecast

Prolonged Low Oil Prices

National Baseline

Source: Moody’s Analytics

Orlando Job Growth (Historical and 

Forecast) (YoY)

Los Angeles Job Growth (Historical and

Forecast) (YoY)
7

Tim Komosa

Economist Manager

Multifamily Economics and Market Research

Kim Betancourt

Director of Economics

Multifamily Economics and Market Research

April 2016

Opinions, analyses, estimates, forecasts and other views of Fannie Mae's Multifamily Economics and Market Research 

Group (MRG) included in these materials should not be construed as indicating Fannie Mae's business prospects or 

expected results, are based on a number of assumptions, and are subject to change without notice. How this information 

affects Fannie Mae will depend on many factors. Although the MRG bases its opinions, analyses, estimates, forecasts and 

other views on information it considers reliable, it does not guarantee that the information provided in these materials is 

accurate, current or suitable for any particular purpose. Changes in the assumptions or the information underlying these 

views could produce materially different results. The analyses, opinions, estimates, forecasts and other views published by 

the MRG represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie 

Mae or its management.