So What Exactly Is The "Short Homebuilders" Thesis At This Point

[Spekulatius]

Well realtors and those business associated with realtors have a bunch of problems, both temporary (lack of transaction volume ) and probably permanent (falling commissions).

 

On single family homes in general we have hit the affordability limit in many cases - a result of a double whammy of higher prices and high interest rates, which typically don’t occur at the same time. The result is that affordability is at a historical low and it’s looking even worse than 2006/2007. Renting is much cheaper than buying even when you take out the amortization of a 30 year mortgage payment virtually anywhere.

 

Something is gotta give. Just two datapoints, Realtors in open houses I have visited have told me that the market has shifted into a buyer market here since May. This is not reflected in public statistics or even news articles here at all which still talk about a sellers market. A shift from seller to buyers markets generally means 5% off right off the bat, typically in the form of incentives, free repairs, rebates and what not. The price changes in stats come later.

Edited July 20 by Spekulatius

[handycap5]

On 6/14/2023 at 12:32 AM, Gregmal said:

So the stock peaked at $40, spent tons of time between $10-25, and wouldn’t have been a worthwhile investment? Especially with a common sense DCA strategy?

 

There is a reasonably lively thread under the DHI ticker on this website that I think can often be applied to other homebuilders as well. 

 

In my experience, 2003-2006 was a truly unique occurrence in the US housing industry. I might say "it was different that time" and now its just a more normal business in a sometimes cyclic industry with favorable medium-term supply-demand dynamics, scale advantages, etc. 

[Gregmal]

You know housing is a solid place to be when even Willie Browns ex lover’s economic platform hinges on plowing money into the housing ecosystem. 

[Red Lion]

On 8/16/2024 at 1:51 PM, Gregmal said:

You know housing is a solid place to be when even Willie Browns ex lover’s economic platform hinges on plowing money into the housing ecosystem. 

If the Cali contingent takes over we could easily see housing double from here again. 
 

In my hometown (about 3 hours from the sf Bay Area) housing is very affordable compared to the rest of the west coast, but they just finished a 59 unit “affordable housing” complex at over $700k per unit. You can buy a nice 2500 sf house for 700k in the same market. 
 

California has been playing lip service to affordable housing and infill development for at least 5 years now while the cost of replacement just keeps going higher.  

[brobro777]

I got a buddy who lives in Bergen County NJ and he tells me the home prices in his town are continuing to go crazy, year after year after year. That's with NJ property taxes - at least California has Prop 13

 

There sure seems to be lots of down payment assistance programs, 3% FHA loans, VA loans with 50% DTI, etc. etc....

 

[Gregmal]

9 minutes ago, brobro777 said:

I got a buddy who lives in Bergen County NJ and he tells me the home prices in his town are continuing to go crazy, year after year after year. That's with NJ property taxes - at least California has Prop 13

 

There sure seems to be lots of down payment assistance programs, 3% FHA loans, VA loans with 50% DTI, etc. etc....

 

The Bergen County property market literally never goes down. Never. GFC home prices basically just stayed flat and still sold inside a week. 
 

My sister in law was in the market for a starter home for 5 years. 2 years ago she finally threw in the towel and bought a 1930s 2/2 in Waldwick for $480k. List price was $400k. Her explanation was “I’m tired of being outbid for stuff that isn’t even on the market long enough to see. I’ve bid and missed out on 2 dozen homes over the last 3 years. I just wanna get on with my life”. 

[brobro777]

24 minutes ago, Gregmal said:

The Bergen County property market literally never goes down. Never. GFC home prices basically just stayed flat and still sold inside a week. 
 

My sister in law was in the market for a starter home for 5 years. 2 years ago she finally threw in the towel and bought a 1930s 2/2 in Waldwick for $480k. List price was $400k. Her explanation was “I’m tired of being outbid for stuff that isn’t even on the market long enough to see. I’ve bid and missed out on 2 dozen homes over the last 3 years. I just wanna get on with my life”. 

 

Yea I believe it. I remember hanging out with this buddy in the fall of 2009 and he was whining about how him and his wife were having a tough time buying a house in Bergen County (they ended up buying in Dec 2009 I think) because the sellers wouldn't negotiate and stuff. 

 

Now 15 years later he texts me that new builds in his neighborhoods are going off at $2M+

 

Haha

 

[Spooky]

https://on.ft.com/3XdktnN

 

Article in the FT on the US housing market - housing starts on track to fall 16% this year with US homebuilders facing their highest credit crunch in more than a decade and banks cutting lending for residential construction by more than 10%. All of this amid a housing shortage.

[handycap5]

57 minutes ago, Spooky said:

https://on.ft.com/3XdktnN

 

Article in the FT on the US housing market - housing starts on track to fall 16% this year with US homebuilders facing their highest credit crunch in more than a decade and banks cutting lending for residential construction by more than 10%. All of this amid a housing shortage.

 

Loans outstanding went to $92 billion compared to $102 billion last year. 

 

It is worth noting that 1) the large public builders are often near net cash, 2) generating ample cash flow, 3) increasingly use options, land banking arrangements reduce the capital tied up in the production of homes. If there is an adverse impact on the FDIC loan volume statistics the FT cited, it would disproportionately fall on the non-public and smaller builders. But the advent of land banking, etc. may reduce the need for bank financing in the entire industry. So the statistics might reflect financing mix change as opposed to something more fundamental. Do others have any insight on this? 

Edited September 4 by handycap5
spelling, ARGH!

[Gregmal]

So with this recent hurricane in view, I can’t help but think this highlights the current dynamic driving homebuilders. Much of the current US housing supply is simply not built to current housing standards. Everyone thinks of Florida, but really, so many markets are unprepared and ill suited for what many consider black swan weather events. 
 

We talked awhile back about supply, but I mentioned how millennials and current home buyers and prospective don’t want their parents homes. They want modern built homes with less space and shiny kitchens and huge great rooms. This begs the question…is the new build MPC centric, resort style, big builder home the home of the future? If so it’s hugely bullish for the big guys. I bought a bunch of TOL in July on the dip and it’s already up $40 a share. Will this trend only accelerate given the recent weather related news cycle?

[Spekulatius]

From my limited data looking at the CLT home market (a city with many Millenials moving here), they don’t want MPC’s either.

 

They want to live close to the town, near public transport and close to restaurants - the work life thing.

 

So what really is hot here is gutting out the 50’s and 60 ‘s ranch homes in certain areas with ~1300 sqft and creating  the open floor plan they like. Guess what, older folks where kids moved out already like these homes too.

 

The MPC and planned communities are too far out and without public transportation. They are for people with kids liking this lifestyle with pool, picket ball courts and all that.

Edited September 28 by Spekulatius

[Red Lion]

22 hours ago, Spekulatius said:

So what really is hot here is gutting out the 50’s and 60 ‘s ranch homes in certain areas with ~1300 sqft and creating  the open floor plan they like. Guess what, older folks where kids moved out already like these homes too.

 

I've done this on a couple houses recently and I can vouch for the fact that it's definitely cheaper and way less hassle to just buy a brand new track home. Not that I'd want one, even though I'm a (geriatric) millennial. 

[handycap5]

On 9/29/2024 at 10:19 AM, Red Lion said:

 

I've done this on a couple houses recently and I can vouch for the fact that it's definitely cheaper and way less hassle to just buy a brand new track home. Not that I'd want one, even though I'm a (geriatric) millennial. 

 

I think a "lollapalooza" is happening in the housing market, primarily due to classic supply-demand dynamics. Cherry on top - I think others underappreciate the marketing advantage that new single-family home sellers enjoy with a combination of move-in ready spec inventory and the ability to guarantee a predictable affordable 30-year monthly payment at signing through mortgage rate locks and mortgage buydowns.