2023’s Biggest Surprise: A Massive Housing Rebound - InvestingChannel

2023’s Biggest Surprise: A Massive Housing Rebound

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#ad 2023 Investment Outlook: The Top Trends to Watch

Last week, we used the surge in homebuilder stocks over the last few months to help illustrate a broader contention: that the worst, which wasn’t even that bad, is behind the housing market. Brighter and even more expensive days lay ahead: 

The relatively modest drop (in housing prices) will bring some once priced-out people off the sidelines. But only the most job-secure and financially confident. They’ll look at lower rates, lower prices, and the subsequent lower monthly payments and pounce, biding their time until (they assume) they can refinance in 2024 or 2025 at much lower interest rates. 

This will, at the very least, construct a solid floor for housing prices (as in, they won’t crash), if not put them back on an upward trend. They’ll likely start to go back up by 2024, if not at some point in mid-to-late 2023.

Today, we expand and further support this line of thinking. 

In fact, we’ll go all contrarian on you and the fat-cat Wall Street analysts. So scroll with us as we call a bottom and suggest a couple of recently downgraded stocks to buy.  

A preview: The Juice thinks there’s a lot of hyperbole and hysteria out there about housing that the facts simply don’t support. Facts we can’t see in lagging data, such as Q4 big-bank earnings reports.


2023’s Biggest Surprise: A Massive Housing Rebound

Key Takeaways:

  • A plethora of data indicates the housing market is about to roar back. 
  • Even if the bottom on prices isn’t in, it’s close, and any further drops in housing prices will be relatively small. 
  • Now might be the time to buy a house and two big-name stocks. 

This will likely be the most image-heavy Juice yet. Because we think it’s the best way to make and illustrate our point that the worst is behind a housing market that will come roaring back in 2023. 

So follow along with us. 

First, there’s anecdotal evidence via on-the-ground reports from real estate agents across the country. 

The other day, Lance Lambert, Fortune’s excellent real estate editor, tweeted this:


Source: @NewsLambert on Twitter

Lambert followed up by asking real estate agents to chime in with observations from their markets. 

A majority of the dozens of the responses he got highlighted that in addition to the uptick in activity, we should pay attention to low supply: 




Source: Various Twitter users

In market after market, agents are reporting low inventory, which has led to robust activity with homes staying on the market for shorter periods of time and receiving more bids. 

Don’t like anecdotes? Here’s some hard data from the Mortgage Bankers Association: 

  • As of the MBA’s January 25 and 18 reports, mortgage applications increased 7.0% and 27.9%, respectively, from the previous week. 
  • That’s after a relatively paltry 1.2% week-over-week increase in the January 11 report. 
  • In the January 4 report, the MBA reported a 13.2% decrease in mortgage applications in the previous two weeks. 
  • But we think the small gain and two weeks’ worth of decreases around the holidays happened because of the holidays. 
  • In the December 14, 2022, report, applications increased 3.2% week over week. 
  • In the December 7, 2022, report, they were up 1.9% from the week before. 

The Juice knows a trend when we see one. 

We also know data from the big banks often lags. Like this look at mortgage originations from Bank of America (BAC)’s recent earnings report: 


Source: Bank of America 

Similar story at Wells Fargo (WFC):


Source: Wells Fargo

Mortgage activity was weak in Q4 of last year. No surprise. But clearly, based on the MBA data, it’s coming back. 

That’s the bottom we’re calling. 

While these numbers might fall for another quarter, we think they’ll rebound shortly thereafter. So, after some recent analyst downgrades (the sure sign of a bottom!), we like big banks, particularly BAC and WFC. 

Sure, net interest income will take a hit if mortgage rates continue to come down. But refinance activity and new mortgage originations will increase, breathing life into one of the few segments that has held big banks back during this housing cooldown.

Pardon that aside, but we’re not done with our theory on housing. 

Home Builders

Source: National Association of Home Builders

That chart comes from the National Association of Home Builders and measures homebuilder confidence. As homebuilders cut prices to spur demand, they’re actually becoming more confident. Note the late-2022, January 2023 uptick. 

We have some super easy-to-read writing on the wall:

  • Housing became outrageously unaffordable as mortgage interest rates soared and housing prices hit record highs. 
  • Now, with cooling prices, falling rates, and low supply, buyer activity is majorly picking up. 
  • More prospective buyers coming off of the sidelines means we’ll find a bottom on housing prices. They’ll surge on increasing demand and low supply. If we don’t see this come to fruition in Q1, expect to see it clear as day in Q2, Q3 at the latest.

That rant made us tired. And these pretzels are making us thirsty. 

The Bottom Line: Fitch, a well-respected financial institution focused on credit ratings and global capital market research, predicts U.S. housing prices will be anywhere from flat to down 5% in 2023. This flies in the face of those articles you read throwing out double-digit numbers.

You do you, but if you’ve been on the sidelines, you’re financially prepared, and you really want to buy a house, now might be the time to ring up your suddenly busy real estate agent.

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