Goldman: Housing Prices Will Weaken In Oil-Driven Areas Of U.S.

Benzinga

The first signs of oil-related housing market weakness may finally be starting to show in regions of the country that have high exposure to the U.S. oil industry. According to Goldman Sachs analyst Hui Shan, the labor markets in Arkansas, Louisiana, Montana, North Dakota, Oklahoma, Texas, West Virginia and Wyoming have finally started to diverge from other markets throughout the country.

As we continue monitoring various economic and housing metrics, we expect to see softening house price growth in regions where energy plays an important role, Shan explains. Goldman notes that residential construction has already begun to slow in these areas and commercial real estate mortgage delinquencies have started to rise.

Continue Reading Below

For now, at least, housing prices and foreclosure rates have been mostly unaffected in the majority of areas in these states, but Goldman believes its only a matter of time.

Related Link: These MLPs Might Be The Best 'Lower For Longer' Oil Plays

Goldman remains well below consensus on housing prices in the next five years. The firm is forecasting a 13 percent rise in the national average home price through 2020, well short of consensus projections of an 18 percent rise.

So far this year, the United States Oil Fund LP (ETF) (NYSE:USO) is down 17.8 percent and the SPDR S&P Homebuilders (ETF) (NYSE:XHB) is down 2.3 percent.

Disclosure: the author holds no position in the stocks mentioned.

2016 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.