The housing market seems like it’s about to roll over. But we think things are going to get a lot better for real estate stocks. Here’s why.
Prices are still elevated, and activity is still within the normal range. To be sure, this is nothing like 2008. At that time, there was massive oversupply and very poor loan quality. Neither exist today. In fact, we have the opposite – massive undersupply and very high loan quality. And the X factor here is incredibly high demand.
People my age (in their twenties) are becoming super proactive about their financial future. As a result, they’re looking to own their homes rather than rent on the sidelines. The moment they see weakness in the market, they’ll jump in and inject massive pent-up demand into real estate.
And guess what? The bottom is in sight for the housing market…
It’s likely the Fed will pivot in the coming months, for instance, meaning mortgage rates are close to maxing out and declining in 2023. By then, the housing market will grow strong again.
Like other equities, real estate stocks are priced for the future. That’s why real estate stocks like Opendoor (OPEN) were crushed before the housing market rolled over. It’s logical that they’ll begin rebounding before the market stages its comeback.
With valuations washed out, it’s a great time to buy real estate stocks, before the major housing market boom of 2023.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.