Oklahoma City Real Estate Afloat in Sinking U.S. Economy

Oklahoma, where the wind comes sweepin' down the plain!
And the wavin' wheat can sure smell sweet
When the wind comes right behind the rain.

Rogers and Hammerstein aside, real estate in Oklahoma City may indeed smell sweet to investors looking for a region with positive economic prospects and a property market that seems to be doing well despite the mortgage crisis. In fact, some of the economic factors that are bringing other regions to their knees—such as high gas prices—may actually offer Oklahoma City an economic boost that could benefit investors in the area.

Oklahoma City is located near the center of the state of Oklahoma and serves as the state’s capital and the seat of Oklahoma County. The city covers 621 square miles, making it one of the largest cities in land area in the United States, according to the official Oklahoma City website. The city has a population of 558,000 people.

Energy forms an important piece of the economy, both of the city and of Oklahoma state, with oil reserves first discovered in the area in 1928. “Oklahoma remains an energy state and the heavy concentration of oil and gas activity in the metro area will provide a boost to area job and income growth as long as energy prices remain high enough to encourage local firms to expand their operations,” according to the 2008 Oklahoma Economic Outlook report by Mark C. Snead of Oklahoma State University’s William S. Spears School of Business. Because of this, the rising oil costs that are bringing other regions to their knees may actually be helping counties in the state of Oklahoma.

“The Oklahoma City region is outperforming the state for much the same reason that the state is outperforming the nation—energy,” according to Snead. “The greatest income gains in the metro area have occurred in Oklahoma County and have propelled the county among the ranks of the top ten nationally in terms of income growth in recent data releases.”

The city boasts a low median housing cost of $134,900, according to Zillow.com, and 87 percent of Oklahoma City homes are occupied, leaving the area with a 13 percent vacancy rate. Of occupied homes, 38 percent are rental units with the remainder being owner-occupied. A property owner in Oklahoma City should expect to pay approximately $1,104 per month for property-related expenses and mortgage payments, while owners without a mortgage will pay approximately $373 on average, according to 2006 U.S. Census data. Median gross rent was $570 per month as of 2005, according to census data.

Oklahoma City’s overall economy may bode well for investors. Although job growth in the area was down in 2007 from previous years, it still exceeded the national average growth rate for the year. The Oklahoma City Metropolitan Statistical Area (MSA) experienced a job growth rate of 1.7 percent for 2007, a drop from a rate of 2.2 percent in 2005. The United States averaged a growth rate of 1.3 percent for 2007. Oklahoma City is expected to add 6,800 jobs in 2008 and 9,400 jobs in 2009, according to Snead.

And, despite the difficulties befalling housing markets around the world, “[t]he Oklahoma City construction market has hardly noticed the national building slowdown and should remain strong through 2009. While some housing-related hiring weakness is expected in the financial services sectors, the metro area will primarily be impacted by the national housing slowdown in an indirect manner through marginally slower U.S. economic growth,” according to Snead. He also wrote that homeowners can expect home values in the Oklahoma City MSA to increase by 2 to 4 percent through 2009.

Because of economic factors, some regions in the city may be in better shape for investment than others where job gains or losses could affect residents’ incomes and buying power. Although all seven counties within the Oklahoma City MSA experienced job increases between 2003 and 2006, the greatest increase was in Lincoln County, which experienced an increase of 21.7 percent during that time period. Cleveland and Canadian Counties together accounted for approximately 30 percent of new jobs created in the region during the same period, according to Snead. Logan and Grady Counties experienced the lowest increases, with rates of 3.1 percent and 2.1 percent, respectively.

For investors looking for a market that seems to be holding its head up despite surrounding economic turmoil, Oklahoma City real estate may be worth a closer look. The region’s energy-based economy and overall market steadiness may prove worthwhile in the long run.