Oil Price Dynamics and Housing Demand in Oil Producing Counties in the U.S

Nyakundi Michieka (), Richard S. Gearhart () and Noha A. Razek ()
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Richard S. Gearhart: California State University
Noha A. Razek: University of Regina

Journal of Economics and Finance, 2024, vol. 48, issue 2, No 11, 483-512

Abstract: Abstract We assess the impact of changes in oil prices on building permit applications in the top oil-producing counties, using monthly data between 2004 and 2021. In the long-run, a positive shock in oil prices increases the number of home permit applications in Lea and McKenzie Counties. Long-run point estimates also reveal that a 10 percent increase in oil prices reduces building plans by 2 and 3.4 percent in Kern and Oklahoma Counties, respectively. In Midland and McKenzie Counties, only long-run changes in oil prices impact home investment decisions while short-run changes have no impact. The inverse relationship between oil prices and permit applications hints that investors may dampen construction plans in lieu of higher costs of raw materials during periods of higher energy prices. Threshold Autoregressive model findings demonstrate that changes in permit applications occur during periods of high oil prices. Our findings imply that the expansionary monetary or fiscal policies that would be required to revive the housing market would need to be regime and region specific. Thus, coordination between regional lending units and investors is important and can boost recoveries from economic downturns.

Keywords: Investment; Housing; Oil Prices; Dynamic Comovements (search for similar items in EconPapers)
JEL-codes: C22 P18 Q41 R31 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s12197-024-09667-w

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