Adding some data points to support these amazing insights put forth by @rupaniamit
Why are inventories so low?
62% of US mortgage holders have a rate below 4% and 92% have a rate below 6%. With current mortgage rates at close to 7%, many existing homeowners are staying put, leading to a dearth of existing homes for sale.
This has led to record low inventory since 2012-
With fewer existing homeowners selling their homes, new homes are becoming a much larger share of the market.
All of this getting beautifully captured in the stock price movement of Home Construction Companies-
Let us see if Pokarna is able to capitalise on this. One worry which I have is that this phenomenon is supply-led and not demand-led. What I mean by that it is clearly visible from Amit’s table of “House Delivery Estimates” that New House Delivery in CY23 is not expected to be 10-15% higher than 2022 and 2021. It is at the same level. So, why is it still interesting? Given the rise in mortgage rates, new home construction should have fallen but due to the re-seller market being dry, new home construction demand has sustained.
Given that another rate hike is on the cards, mortgage rates will go up from here. This does two things, dissuade more resellers to come into the market and also dissuade potential buyers. It is an interesting tug-of-war situation. Would have been more upbeat if this was a demand-led situation.
Disc: No Position.
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