Houston Luxury Home Prices Effects from Iran War

If the price of oil remains high, Houston’s luxury real estate could appreciate along with it.

As the epicenter of the oil industry in the U.S., the city’s riches have long been tied to energy. A decade ago, tumbling oil prices dragged down home values in Houston’s luxury enclaves. But the correlation between oil prices and real estate is weaker today than it used to be, experts say.

The conflict in Iran has tightened oil supply, resulting in prices jumping above $100 per barrel. If prices stay up, it could benefit some Houston luxury home sellers by enriching the corporations and energy executives who make up a significant part of the city’s buyer pool.

That’s a big if, according to longtime Houston broker Paige Martin, co-founder of the Houston Properties Team.

“A short-term geopolitical spike usually does not move Houston luxury housing much on its own. Quick increases in crude oil prices are not enough to trigger major long-term capital decisions by corporations, unless they stay elevated for months and remain high enough to change drilling plans, hiring and investment activity,” Martin said.

As University of Houston economist Adam Perdue points out, oil brokers expect prices to lower relatively soon. Without expectations of a sustained price increase, oil companies have no incentive to expand operations, Perdue said.

“If you go look at the CME West Texas Intermediate futures curve, we’re already back down to the low $70s [per barrel], or mid-to-low $70s, by the end of the year. So any kind of impact right now in the oil industry is purely financial. There’s going to be some traders or some shareholders who get a financial windfall,” Perdue said.

Shocks to the oil business have rippled through Houston’s real estate in the past, affecting both commercial and residential sectors. In office buildings, seven consecutive years of negative absorption followed the oil bust of 2015.

However, sudden booms don’t always materialize into energy industry growth. The price of oil rose to $105 a barrel when Russia invaded Ukraine, but just months later, Houston’s office vacancy rate exceeded all other major markets at 19 percent.

Plenty of energy industry professionals are still trading homes in Houston’s luxury neighborhoods. The top residential sale of Harris County last year was a mansion at 31 River Oaks, sold by the estate of former Fisk Electric owner Larry Brookshire. It was asking $18.9 million. The first ultra-luxury sale this year was a home at 3649 Chevy Chase Drive, sold by oil broker Jarrad Lewis, asking $13 million. The biggest price tag on a residential sale last month was just under $12.3 million for the home at 412 Timberwilde Lane, sold by retired oil executive Oscar Andras.

If oil supply remains tight and prices high — contrary to current market expectations — it could result in higher prices for Houston luxury homes as well.

“Higher oil prices typically boost energy profits, executive compensation like bonuses, and relocations, supporting demand and pricing in high‑end neighborhoods such as River Oaks, Memorial, Tanglewood and West University, while price declines tend to soften demand and extend marketing times,” said CoStar senior director of market analytics Itziar Aguirre.

However, while the energy business still holds significant sway over the Houston economy, it’s ceding influence to other industries, Martin said.

“Right now, our high-end housing backdrop is more mixed than the old oil narrative suggests. Luxury demand has been strong, but a lot of that strength appears to be tied more to the rise in the stock market and broader wealth effects than to any one industry alone,” Martin said.

The Houston economy has diversified considerably since 2015. By 2020, the energy industry accounted for just 8 percent of employment in the greater Houston area, according to Moody’s. In 2023, while oil and gas leases were shrinking, the medical field was growing in Houston’s commercial real estate sector.

Oil prices still matter for the Houston luxury market, according to Martin. However, “if Houston has learned anything from its history as an oil town,” she said, “it is not to confuse a short-term spike with a long-term trend.”