Deutsche Bank: Oil Price Impact On Housing 'Likely Overstated'

In a note to clients on Wednesday, Nishu Sood of Deutsche Bank stated that homebuilder investors shouldn't overly concern themselves about declining oil prices.

Sood surveyed building and building products companies at a recent conference asking what lower oil prices means for their business. The analyst noted the following:

“Overall, most builders expect a net benefit from the lower price of gasoline improving affordability for their customers. Lower prices at the pump may also help builders with land further out since transportation costs won't be a negative for buyers.”

Sood also notes that investors shouldn't concern themselves with builder companies seeing volume declines within the state of Texas. In fact, none of the builders have seen weaker volumes or traffic within Texas as a result of lower oil prices. The analyst believes that it only takes a 1 percent gain in volume outside of Texas to offset a 3 percent volume loss in the state.

Sood singles out recent sell-off in shares of Meritage Homes Corp MTH and LGI Homes Inc LGI and notes that this creates an opportunity for investors.

Image credit: Ray Bodden, Flickr