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Soft Landing For The Housing Market?  

Here’s some data followed by a theory on the housing market.

• High interest rates make mortgages more expensive. This puts an increasing number of people on the sidelines. Some temporarily. 
• Redfin estimates 12% of sellers dropped their asking price over the last month. The highest number since December. 
• The National Association of Realtors reports existing home sales are off 7.2% and 2.4% on monthly and annual bases, respectively. 

Source: National Association of Realtors

Based on the data, we’re cooling off. At least a little. 

However, buyers recently priced out of the market sit waiting, presumably with additional savings at the ready.  

So, instead of a crash, expect these buyers and current house hunters to prop up a housing market that might end up feeling more like a hot shower than the current scalding cup of coffee. 

What This Means For You

Under almost any scenario, we need supply. 

To this end, consider PulteGroup (PHM), the third largest homebuilder in the nation.

The stock’s down 25% YTD after a 80%, five-year run. At current levels – $42 a share – PHM’s P/E ratio is 5.48 with a forward P/E of just over 4. 

Source: PulteGroup, February 2022 Investor Presentation

Well-positioned in hot markets, the company has a strong cash position ($1.8 billion, as of 2021) and continues to buy back shares. 

Its guidance suggests steady, but impressive growth going forward. 

Think of PHM as a long-term play on one segment of this crazy housing market that probably won’t change. 

We need more places for people looking to buy to live.