JRE - The Coming Narrative Shift On Housing: Why Home Builders Represent Great Buying Opportunity

• The stock market is absolutely punishing housing-related stocks as fears of rising interest rates lead to concerns over a major housing correction.
• The reality is likely that home price appreciation moderates back to normal levels. Builders are being valued as if home prices will crash and sales will plummet. Both are unlikely.
• Massive structural changes have occurred in the housing market since the crash almost 15 years ago. Institutional investors, build-for-rent (BFR) demand, and an undersupply of housing inventory are examples.
• The cost to construct new homes has sky-rocketed in this inflationary environment. Housing bears ignore that any normalization, or even decrease in home prices, would be met with significant cost decreases as well.
• Many builders trade at significant discounts to both current book value and forward book value. Builders are deliberately limiting sales. Interest rates are approaching 5% with no discernible change in demand.

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