The Case for Homebuilders: As Simple As Supply & Demand

The Case for Homebuilders: As Simple As Supply & Demand

SPDR S&P Homebuilders (ETF) (NYSEARCA:XHB) have years of fundamental tailwinds ahead of them. Find one that is already sitting on huge swaths of land because land loans are still highly restrictive as prices for it continue to jump.  The main impediment to a full blown housing surge isn’t higher rates, it is lack of supply. For all the fear of the alleged negative consequences of higher rates, they have done nothing to derailed the economy. In fact, as I opined in June, I think they are helping economic growth, not hurting it. In fact we continue to see lending loosen from its overly restrictive levels as interest rates climb.

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Potential homebuyers cannot buy what is not for sale and because we have so many buyers chasing so few properties, price continue to climb.  Because of that homebuilders will enjoy continued demand for homes as well as increasing pricing power.

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Home construction and Supply/Demand remain in very positive territory. The Monthly Supply of (New) Homes for Sale was reported at 4.3mos this morning.

We should expect higher Residential Construction Employment in the coming months, higher general employment and higher stock prices in response to expanded economic activity.

Via: valueplays

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Todd Sullivan is a Massachusetts-based value investor and a General Partner in Rand Strategic Partners. He looks for investments he believes are selling for a discount to their intrinsic value given their current situation and future prospects. He holds them until that value is realized or the fundamentals change in a way that no longer support his thesis. His blog features his various ideas and commentary and he updates readers on their progress in a timely fashion. His commentary has been seen in the online versions of the Wall St. Journal, New York Times, CNN Money, Business Week, Crain’s NY, Kiplingers and other publications. He has also appeared on Fox Business News & Fox News and is a contributor. His commentary on Starbucks during 2008 was recently quoted by its Founder Howard Schultz in his recent book “Onward”. In 2011 he was asked to present an investment idea at Bill Ackman’s “Harbor Investment Conference”.
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