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

Jayson Derrick

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 (NYSE: MTH) and LGI Homes Inc (NYSE: LGI) and notes that this creates an opportunity for investors.

Image credit: Ray Bodden, Flickr

Latest Ratings for MTH

Date Firm Action From To
Nov 2014 Citigroup Maintains Buy
Oct 2014 Keefe Bruyette & Woods Maintains Market Perform
Oct 2014 Barclays Maintains Overweight

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