Proprietary Data Insights Top Homebuilder Stock Searches This Month
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The Experts Are Dead Wrong |
Who are we — humble folk here at The Juice — to question the big dogs? Like Morgan Stanley’s chief U.S. economist who recently predicted a modest decline in housing prices in 2024 alongside increased affordability. And Morgan Stanley isn’t the only one. More than a few big banks think housing prices will go lower from here. As we’ll show you in a second, when you look at what’s actually happening today, translate that to the writing on the wall and then think logically, it’s almost obvious that housing prices will continue to rise and affordability will either stay the same or, more likely, get worse. But first … Part of Morgan’s rationale is that we’ll get more supply from homebuilders. We agree. However, we disagree on the extent to which this will positively impact prices and affordability. Those two factors set aside, The Juice continues to believe in homebuilder stocks for long-term investors. As the current housing crisis persists, the only thing that will remain steady — as prices and interest rates fluctuate — is our desperate need for more housing supply. We say continue to believe because, roughly 18 months ago, The Juice suggested long-term investors look at homebuilder stocks. Though not as sexy as the other market-crushing stocks The Juice suggested you look at in 2022 and 2023, homebuilders have still done quite well. Flashback to what we said way back in April 2022: Under almost any scenario, we need supply. To this end, consider PulteGroup (PHM), the third largest homebuilder in the nation … 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. Since we said that, PHM is up roughly 107%. The other homebuilder stocks that populate today’s Trackstar top five have also done well for themselves over the same period:
For comparison sake, these gains crush the SPDR S&P 500 ETF’s (SPY) 4% gain and the Invesco QQQ ETF’s (QQQ) 15% pop over the same period. Heck, on second look, these homebuilder stocks we suggested you look at actually are pretty sexy. PHM, for example, has outperformed Apple (AAPL), Amazon.com (AMZN), Tesla (TSLA), Microsoft (MSFT) and Alphabet (GOOG)(GOOGL), but not Nvidia (NVDA) or Meta Platforms (META) over the last year. So, almost no matter what happens, we still like homebuilder stocks, particularly for long-term investors. That said, we don’t think any increase in housing supply will be enough to make a meaningful dent in prices or affordability. On prices, here’s how things stand today, looking at recently released housing price indexes:
Some of the writing on the wall:
From there, run some basic logic in your head. These lower rates will bring some prospective homebuyers currently sitting on the sidelines into the market. This alone might be enough to, at the very least, keep prices steady. However, if we keep seeing these national increases, even as the so-called experts predict decreases in 2024, these same people might think their time for a deal is limited. An important, related side note: We’re seeing price month-to-month increases in some of the nation’s relatively affordable markets. According to Redfin, Pittsburgh is up 1.8% and Columbus, Ohio 1.5%, as of September. So, a small drop in prices, combined with lower rates will provide a brief window of opportunity before the buyers flood in and turn this opportunity into a return of bidding wars. The Bottom Line: Short and sweet. The Juice doesn’t just think we’ll see a modest increase in housing prices in 2024 and 2025. We think bidding wars, people paying way over asking price, cash buyers, the return of big investors and homebuyers on the lower end scooping up relative deals in places such as Pittsburgh, will cause prices to skyrocket. What does this mean for you?
Stick with homebuilder stocks as part of a diversified, long-term portfolio. Because supply will be in demand for the foreseeable future. |
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