Varying Views of Economists on Falling Oil Prices for Home Construction

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Falling oil prices on housing has been one of the most controversial topics for economists. They view such idea from different perspectives. Some economists think that the falling of oil prices is beneficial while others see its negative impact on house construction.

There will be an International Builders Show, a huge convention in Las Vegas, which will serve as an assembly of contractors, suppliers, and builders to discuss the industry trends for this year. The organizers of the show are expecting about 125,000 attendees. One of the highlights of the show is the panel of economists who will provide a positive perspective for home sales and house construction this year.

A lot of economists anticipate that builders will be constructing homes for about 804,000 single-families this year. With this in mind, economists see it as an under performance because it falls below the peak of construction in the year 2006. This will denote a huge increase from the year 2014 when the home construction starts was pegged at 641,000.

David Berson of Nationwide Insurance, Frank Nothaft of Freddie Mac and David Crowe of Home Builders Association are some of the economists who believe that home construction will be initiated as the demand increases due to the effects of job development and the entry of young buyers to the housing market. Sooner or later, economists will be looking at the possibility of buyers entering the falling oil price market. If the price of oil continues to fall, it will have a negative impact on a few regional economies that are dependent on the oil industry. However, other nations will still benefit.

According to Mr. Nothaft, the falling oil prices will have the same impact on consumer spending that will reflect as a tax cut. As an effect, this will help strengthen the housing demand of other nations.

The housing market has an indirect benefit as viewed by several economists. As consumers spend more, job and income growth will result to easier opportunities for people to buy their own homes.

On the other hand, other economic analysts and strategists are not that sure. Michael Dahl, an analyst from Credit Suisse, said  that following the fall in oil prices, he will revise his expectations of housing starts to 679,000 in the year 2015 from the former estimate of 694,000 home constructions. Moreover, Mr. Dahl added that he is expecting a decline of 20% in construction in some cities in Texas this year, while the rest of the economy continues to strengthen.

He also concluded that we would be able to see better single-family housing growth for this year compared to last year 2014, but the decrease in home construction activities in some oil-focused local economies defeats other optimistic tailwinds in the market.

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