The 2016 Oklahoma City housing market has continued with relatively steady growth and may actually represent an opportunity for a careful, savvy real estate investor willing to do his or her research and only buy when the time and the property are right.

The Oil Factor and Economic Insulation

First, any investor considering Oklahoma City needs to deal with the elephant in the room: oil prices. It is undeniable that falling oil prices have a negative effect on Oklahoma City’s economy. In February 2016 alone, three separate companies cut more than 1,000 jobs in the area due to downsizing, although arguably only about half of those jobs were linked directly to oil prices.

The good news is that in today’s metropolitan, oil-based economies the “insulation period” for housing when oil prices fall extends nearly two years. When homeowners lose their oil- and energy-related jobs or experience financial difficulties because of oil prices, they do not tend to immediately experience disaster.

While Oklahoma City’s large economy is indisputably tied to oil, there are alternatives for residents in the area. Furthermore, a change in oil price trajectory could shore up the economy before it slides too far.

Even better, most experts appear to think that the worst for oil may be over. With oil prices now rising once more, albeit still far lower than peaks from a few years ago, sentiment in the city and globally about oil is far more positive than it has been. One energy investment portfolio manager recently went so far as to reassure “CNN Money” that we have “reached a bottom in oil.” At a 13-year low of $26.05 a barrel at mid-February, that certainly seems possible, but by the end of the month, oil prices had spiked 30 percent after Saudi Arabia, Russia and other producers agreed to temporarily and tentatively freeze output. Simply improving market sentiment—even without dramatically changing market conditions—could mean another year of steady, though not astronomical growth in Oklahoma City.

Oklahoma City’s Employment Situation and Your Investing Strategy

While most people are blinded by the energy industry when they look at Oklahoma City, the reality of the matter is that the area’s economy and jobs sector is more diverse than you might expect from media coverage. The state alone employs nearly 47,000 individuals, while the U.S. military also maintains a solid presence. The University of Oklahoma and a variety of information technology, engineering and health-related employers also call the city home.

On the whole, the unemployment situation in Oklahoma City has been trending downward since the financial crisis in 2008 and 2009, and it has hovered below the national average since 2006 even at the height of the housing crisis and the Great Recession. At the beginning of 2016, the city was actually on Forbes’ top 20 list of cities with the lowest unemployment in the country.

So what types of investments are likely to strategically fit into the Oklahoma City population’s mindset about homeownership? Thanks to low unemployment, low cost of living and a wide variety of employment opportunities, the city has a growing population of would-be first-time homebuyers waiting in the wings for inventory to become available.

As is the case in most of the country, Oklahoma City has a relatively tighter inventory in the starter-home sector than it does in other layers of the housing spectrum, although investors should note that the city’s housing market is not as competitive at this point in time as other areas of similar size. In fact, the market is presently something of a buyer’s market, which means that investors wishing to establish a strong presence in cash-flowing rentals in the area may have better luck building a larger portfolio for less outlay than they might in other comparable metro areas.

With the relatively cool housing market (according to Greater Oklahoma City, homes remain on market between two and three months) and steady but not stellar appreciation (around 3 percent last year and probably between 2 percent and 3 percent in 2016), the Oklahoma City housing market represents potential for investors looking to be in a location for the long haul. Thanks to the close ties between housing demand and the oil market but equally important employment diversity that keeps the area “plugging along” when oil prices are down, successful investors in Oklahoma City should be considering how to best build their portfolio now while the getting is good and then maintain that portfolio until the market inevitably warms up once more.

Making Yourself at Home in the “Big Friendly”

Oklahoma City has been dubbed “The Big Friendly” and “The Cinderella City” thanks in large part to a massive redevelopment package launched by the metro area in the early 1990s. The initiative, called the Metropolitan Area Projects (MAPS), involved the addition of a variety of civic projects and activities to the city’s offerings and included a new baseball park, a central library, a convention center, a water canal in the entertainment district complete with water taxis, and fairgrounds.

MAPS is an ongoing project and is generally considered one of the most successful public-private partnership undertakings in the United States. Downtown demand for housing, retail space and amenities skyrocketed in the wake of its inception, and the project has continued to grow and expand for more than two decades now.

While MAPS may have revitalized the downtown area, investors should remember that the draw of such an area is inherently limited when it comes to available housing and also to the market demographic that wants to purchase that housing and has the means to do so. However, the population of would-be residents who wish to live in a city with such a unique downtown area is much larger and growing all the time, thanks to steady, diverse jobs growth and expansion in the area.

Focusing on starter homes that can either be sold to owner-occupants via conventional or creative financing or structured as cash-flow rentals is one of the best ways for a real estate investor to make a long-term home in Oklahoma City.

Urban Planning at Its Finest: A Brief History of MAPS

In 1993, Oklahoma City debuted its public-private capital improvement program known as the Metropolitan Area Projects (MAPS). The program has gone through three incarnations since that time (MAPS, MAPS for Kids and MAPS 3), and all three receive funding from a self-imposed, regularly reapproved one-cent sales tax on the city’s residents. The final project of the current MAPS incarnation, MAPS 3, is scheduled to be completed in 2021. MAPS has a stellar history of self-regulation and has not ever extended a sales tax beyond the initial projection and still has been able to complete projects past the termination of any one sales tax. All MAPS projects are built debt-free in order to avoid burdening future taxpayers.

Twenty years after the program’s debut, the Oklahoma City Chamber of Commerce commissioned a study to explore the effects of the MAPS program on the city. In addition to tangible additions to the skyline and infrastructure, such as Bricktown Ballpark, the city’s motorbus Trolley Transit System, the Bricktown Canal, the Cox Business Services Convention Center, the Ford Center Arena, the Civic Center Music Hall and a city Library/Learning Center, the MAPS program has been credited with massive retail and hospitality services growth in the area. For example, the commission determined that the Oklahoma City Health Center, multiple new downtown hotels, entertainment venues, office buildings and a Bass Pro mega-sporting goods store were all directly tied to employment opportunities and the rising attraction of the Oklahoma City downtown area.

Of course, it is easy to lay claim to this type of development and more difficult to back that claim up. The Chamber of Commerce used a system by which it identified influxes in the population of what it called “the creative class” and “sophisticated consumers of place” in addition to economic models to directly tie MAPS to secondary and tertiary growth.

The present manifestation of MAPS, MAPS 3, has a voter-approved tax duration of seven years, from 2010 to 2017, and was approved in December 2009. Construction does not begin until funds are already in place, so construction duration will last from 2012 to 2021 with a total budget of $777 million. MAPS 3 projects include improvements and additions to the convention center, a downtown public park, modernization of the streetcar and transit systems in the area, improvements to the Oklahoma State Fairgrounds, Senior Health and Wellness facilities, Oklahoma River improvements and maintenance and addition of hiking trails and sidewalks.

Investors can certainly rest easy knowing that the municipal government is, insofar as any government can be considered reliable, demonstrating a long-term and effective dedication to improving the location of that investor’s real estate investment. Any local government that displays such dedication and commitment to debt-free development in a productive and trackable manner deserves commendation and consideration when you evaluate where to place your investing dollars.

The Foreclosure Factor

One of the most exciting things about Oklahoma City real estate for many investors could be the foreclosure laws and tax lien laws in the state. With a steady market and a slight tightening on the starter-home end of the housing inventory, Oklahoma City is ideally positioned for investors who wish to acquire properties at a deep discount via foreclosure auctions or purchasing liens against properties.

Foreclosures can be judicial or nonjudicial, and happen relatively quickly, on a timeline of about 90 days from the initial filing. Lenders in the area tend to start the process of homeowner notification a little over a month after the original default occurs if no attempt is made to cure the problem.

Tax lien auctions happen only once a year in the area, but properties that are not purchased at auction and remain unredeemed are also sold outright at a discount in this state.

Note: Investors should be aware that homeowners involved in judicial foreclosures can demand that their properties not be sold for less than 66 percent of market value. All indications are that this option is very seldom utilized. 

Categories | Article | Market & Trends
  • Carole VanSickle Ellis

    Carole VanSickle Ellis serves as the news editor and COO of Self-Directed Investor (SDI) Society, a membership organization dedicated to the needs of self-directed investors interested in alternative investment vehicles, including real estate. Learn more at SelfDirected.org or reach Carole directly by emailing Carole@selfdirected.org.

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