Keepin' It Real  

Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

Homebuilders: The 'B' Word

  • The scorching-hot single-family housing market has finally cooled in recent months as record-low housing supply and soaring home prices have forced potential buyers to pause their home buying search.

  • Would-be buyers are facing an increasingly tight rental market, however, as apartment and single-family rents are suddenly soaring and rental rates are quickly closing the gap with home values.

  • The B-Word? Soaring prices have renewed the perennial "Bubble" calls from pundits, but fundamentals suggest that we're instead more likely to see a somewhat "boring" return to normalcy ahead.

  • Rising rates remain a key risk factor, but residential real estate has historically proven to be one of the most reliable inflation-hedges and supply/demand fundamentals remain extremely compelling.

  • Discounts are few-and-far-between across the housing markets, but homebuilders are now on sale following a 15-20% correction. Builders are quintessential "Growth At Reasonable Price" stocks, trading at single-digit forward P/E multiples despite double-digit growth rates.

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Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at HoyaCapital.com. Hoya Capital Real Estate advises an Exchange Traded Fund listed on the NYSE. Hoya Capital is long all components in the Hoya Capital Housing 100 Index.

Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.

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