DR Horton DHI - US Housing Market Stocks Analysis

Companies / US Housing Mar 16, 2023 - 10:12 PM GMT

US House Prices Current State

My interim view as of early July 2022 based mainly on my stock market, economy and UK housing market analysis at the time (Stocks Bear Market Rally Last Gasp Before Earnings Season, US House Prices 3 Year Probability Range) concluded in an rough expectation for US house prices to target a gain of between 20% and 30% over the next 3 years that would be punctuated by a correction during 2023.

The latest Case Shiller 10 city index for November 2022 is 313, down form a peak of 330 in June 2022 (remember there is a 2 month lag in reporting of data). Thus US house prices have corrected by 5% from their highs though still positive on an 12 month basis at +6.3% which isn't anywhere near the shrill cries of the doom merchants such as Michael Burry of Mid 2022.

And given the background of soaring mortgage interest rates and contracting corporate earnings coupled with the inflationary cost of living crisis then +6.4% over the past 12 months is a sign of relative strength that suggests that yes US house prices whilst weak during 2023 are not going to fall off a cliff as many prospective buyers hope they will, after all the so called recession saw the US economy add 517,000 jobs last month, more than double market expectations! Thus the correction looks set to mild and prove temporary with prices set to resume their bull and likely to trade at new all time highs during 2024.

US Housing Stocks Mini Portfolio

Where housing stocks are concerned the more bad news the better which is the mistake most investors make when seeking good news to buy, countless times I get asked why am I buying x,y,z, stock when the news is so bad! We'll how else do you think you are going to get the stocks to trade down to a cheap prices? Not when the news is GOOD! You want the news to be BAD, DIRE, disastrous even because that is when one gets the greatest buying opps! It's why during October I looked like a porcupine given all the falling knives that I had tried to catch, which included a few US housing stocks though to very limited extent, pinprick exposures so as to get give me some skin in the game towards focusing on the US housing market.

When most consider investing in US housing stocks then the go to stock at the top of every list is D R Horton which despite it's bull run trades on a PE of just 6.1 so not expensive even if earnings contract over the coming quarters.

Clearly DR Horton is in a bull market, it's definitely not a 2007-2008 style housing collapse! In fact the exact opposite is true!

In terms of investing this ship has largely sailed, the time to invest would have been when I first posted my preliminary view on the US housing market when the stock was trading at around $65, $99 is a 50% advance which puts the stock about 10% away from it's all time high, it's too late! But don't worry there are plenty more opps out there that have yet to set sail.

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By Nadeem Walayat

http://www.marketoracle.co.uk

Nadeem Walayat has over 30 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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