|
 Twenty months into the worst oil price crash since the 1980s,
well-heeled residents of the world's oil capital are among the
hardest hit largely because tanking energy firm shares make up much
of oil and gas executives' compensation.
In River Oaks, a neighborhood of palatial mansions and lush gardens,
the average sales price of a home has tumbled to $1.3 million from
$2 million in the middle of 2014 when oil began its more than 70
percent slide, according to data from the Houston Association of
Realtors and Keller Williams. Median property prices in the area
have already fallen further in this downturn, which is not yet over,
than the 16 percent drop in the previous oil slump in 2008 and 2009.
"When oil does well, River Oaks does well. When oil does bad River
Oaks does bad," said Paige Martin, a Keller Williams broker who
specializes in the neighborhood. "Not everybody can afford a $10
million house."
City-wide data also show that while overall sales of single family
homes fell 2 percent in January, sales of those priced over $500,000
tumbled 9 percent. The overall median house price was $200,000, up 5
percent on the year, according to the realtors' association.
 While Houston's economy is far more diversified now than in the
1980s when the city lost 13 percent of its jobs, it remains home to
5,000 energy-related firms and the fortunes of oil and gas
executives are tied more than ever to the energy market.
Since U.S. lawmakers passed a law in 1992 encouraging
"performance-based" pay, the share of stock options in executive
compensation has steadily increased, said David Bixby, head of the
Houston office for Pearl Meyer compensation consultants.
"Now, you're looking at 70 to 80 percent of CEO compensation in
stock on average for oil and gas companies," he said. "They are
going to be exposed to commodity price cycles."
ACROBATS AND FOR SALE SIGN
For example, former oil executive, Kolja Rockov, whose extravagant
wedding with dancers and acrobats became a local online sensation
three years ago, briefly put his unfinished mansion on the market
for $6.9 million, according to listings. Work appeared to stall on
his house as an SEC filing showed he involuntarily sold 239,000
shares of the company's tanking stock he had used as a collateral
for a loan. Rockov lost his job as Linn Energy LLC's <LINE.O> CFO in
August.
Rockov could not be reached for comment.
Luxury car sales are also slower in Houston than in other parts of
the state and the country.
"If you’re working for an energy company, you see all this stress
around you, it might nick your purchase confidence, even if you are
fairly high income,” Earl Hesterberg, chief executive of
Houston-based Group 1 Automotive Inc <GPI.N>, told Reuters.
He said excess inventory was most acute for top line BMW <BMWG.DE>
and Mercedes-Benz <DAIGn.DE> models in Texas and Oklahoma.
[to top of second column] |
In a nod to the downturn, Ouisie's Table, a River Oaks institution,
is now offering its "Oil Barrel Bargain," a three course dinner for
the price of a barrel of oil, now around $30.
To be sure, oil executives are not alone in feeling the pain. Many
blue collar jobs in oilfield equipment production have disappeared.
So have thousands of middle management jobs in oil exploration and
production. A regular Uber customer is likely at some point to ride
with a former energy industry professional.
"It pays for the mortgage," said Matthew Clemonds, who once did
mapping for pipeline companies and now works for the ride-sharing
company.
Job growth has slowed to a crawl from the breakneck pace of 100,000
a year during the oil boom; housing starts are down and subleasing
of new office space is rising, according to government data and NAI
Partners, a real estate consultancy.
But so far, owing to its diversity, the metropolitan economy has
shown remarkable resilience, adding 20,000 jobs to just over 3
million last year.
For example, Houston is home to the Texas Medical Center, the
world's largest cluster of hospitals, research facilities and
affiliated universities, which says it employs 106,000.
In the energy sector, about $50 billion being invested in new
petrochemical plants to take advantage of cheap supplies is helping
offset upstream job losses.
"This is the best oil price downturn we have ever had," said Ted
Jones, chief economist at Stewart Title Guaranty Company. "We still
have more jobs than we have ever had in history."
Bill Gilmer, a University of Houston economist, says so far it has
paid off to tough it out through oil's booms and busts and notes
that ever since 1969 Houston has consistently ranked among the
fastest growing U.S. cities.
"The only problem is that it can be a rollercoaster."
(Additonal reporting by Bernie Woodall in Detroit; Editing by Tomasz
Janowski)
[© 2016 Thomson Reuters. All rights
reserved.]
Copyright 2016 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
 |
