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

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.

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

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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) USO is down 17.8 percent and the SPDR S&P Homebuilders (ETF) XHB is down 2.3 percent.

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