Oil prices dropped below $110 a barrel today, giving weight to predictions made 16 months ago by the chief economist for the Real Estate Center at Texas A&M University.
At the 2007 Rural Land Conference, Dr. Mark Dotzour mentioned that high prices for building materials and energy would hinder economic growth in the United States. He also suggested that the Chinese economy may be becoming overbuilt and overheated, and that commodity prices would decline in the weeks following the Beijing Olympics.
Less than two weeks after the Olympics ended, oil prices dropped. Dotzour says the jury is still out regarding the impact on construction costs.
“If China is indeed overbuilt, we could see further declines in the cost of construction materials similar to the decline in oil prices,” he said. “If this hypothesis does not pan out and construction materials remain high through the end of the year, then we may be in for a paradigm shift where the cost of erecting buildings is going to be higher for a long time.”
Source: Real Estate Center