Housing Market Freeze: Are Homebuilder Stocks Offering Value?

During their recent episode of the Acquirers Podcast, Travis and Carlisle discussed Housing Market Freeze: Are Homebuilder Stocks Offering Value?. Here’s an excerpt from the episode:

[Tim] Well, yeah. I mean, they bought Taylor Morrison. They bought the whole company.

So they’re going big in that space. And so I think if you look at the value proposition there, it’s attractive. Some of those companies are trading at discounts to book, Meritage Homes, Lennar.

We’ve had a few trades on them on the value options letter that have been very successful and where it’s attractive because you’re able to kind of manufacture that entry price into it. So you can get in at lower prices than Buffett was buying stock in, I guess Berkshire was buying stock. You don’t know for sure if it’s Buffett anymore.

So, but yeah, I think that’s an interesting space. The thing with higher rates is they’re definitely negatives for real estate in general, but long-term they create the environment for a better environment in the future because apartments aren’t getting built right now. They’re not building medical labs.

They’re not building many hotels and stuff like that. I mean, and that’s been going on for a few years, really since the interest rate cycle started and got serious. And so there’s going to be a point where there’s too little supply to meet demand and things like rental prices are going to go up a lot.

I mean, it’s still way cheaper to rent than it is to buy a home, even though it’s not the best housing environment for like the home builders. But like renting is a pretty good deal. I mean, I know it’s still expensive, but it’s a pretty good deal relatively.

So it will set the stage. How long rates stay up here? That’s really the million dollar question.