Prices for mansions in Houston's swankiest neighborhood have tumbled in lock step with crude prices. The Houston Opera has offered free season tickets to patrons who lost their jobs in the oil bust. A fancy restaurant offers cut-price dinners.
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 CFO in August.