Housing Investor Discussion

Finance/Real Estate, Industrial/Transportation, Macro


On September 26, 2023, DeMatteo Research hosted four investors for a discussion on the housing industry and some of the major players. The investors shared thoughts on the macroeconomic landscape (interest rates, housing market concerns, rental pricing), homebuilders (DHI & LEN, valuations, large vs. small builders), building products (BLDR, DOOR, JELD), and the repair & remodel segment (HD, LOW, FND). Overall, the group was most bullish on the large cap homebuilders, viewing them as beneficiaries of a mortgage lock-in effect and seeing upside to current valuations as they continue to take share from regional and sub-regional competition. 

Publicly traded companies mentioned herein: API Group Corp (APG), Builders FirstSource Inc (BLDR), DR Horton Inc (DHI), Floor & Décor Holdings Inc (FND), Home Depot Inc (HD), JELD-WEN Holding Inc (JELD), KB Home (KBH), Lennar Corp (LEN), Lowe’s Companies Inc (LOW), Masonite International Corp (DOOR)

Macroeconomic & Industry Landscape

One investor started the discussion laying out a tale of two markets. The new home side has outperformed largely negative expectations that stemmed from the current interest rate environment. The strength has continued through the most recent round of earnings reports, albeit with slightly more concern around the most recent rate move and some more cautious order commentary from LEN and KBH over the last couple of weeks. With the Fed leaning slightly more hawkish, he wonders whether the strength can continue or if the recent move up in the 10-year rate will catalyze a softening of the new home market. Meanwhile, the existing home side feels frozen as existing mortgage owners are locked in at lower interest rates, which will likely continue to suppress existing home availability given the spread to spot rates. 

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Idea Discussion

Commentor 1 - 2 weeks ago

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