Brad Thomas
Founder & Lead Analyst of Wide Moat Research
American Homes 4 Rent is built for a market where high prices and elevated mortgage rates keep millions of families renting longer. It owns 60,000+ single-family rentals in fast-growing markets and builds new communities rather than competing with first-time buyers for existing homes, adding supply the market needs. It has a BBB balance sheet and a growing dividend, and trades at 19x versus a historical multiple of 36x. x.comÂ
Ugly housing conditions provide the contrarian sentiment for a major homebuilder bull run over the next 12 months. Bears investing through the rearview mirror are going to be proven wrong. x.comÂ
Lennar's shift toward an NVR-style asset-light model could let free cash flow and buybacks compound value even without a rerating. Having spun out Millrose and moved much of its land off the balance sheet, Lennar needs far less capital to grow, so when housing normalizes similar economics could return on a much smaller base. The market still prices it like the old land-heavy builder. NVR created value by shrinking its share count, not via a premium multiple. Ted Weschler is buying heavily. x.comÂ
Real estate is on the verge of a multi-year breakout as the unaffordable housing market that is crushing homebuilders fuels REITs. When people cannot afford to buy, they rent, and REITs collect. x.comÂ
Zillow is a Stage 4 stock in a clear downtrend, a reminder that a company can post decent numbers and still be a terrible stock. Rallies keep failing, and a recent bear flag preceded a 25% drop to new lows over six weeks. Housing stocks lack a favorable backdrop with mortgage rates above 6%. Down 67% from its highs, Zillow needs a 203% gain to break even, and laggards like this drag on performance. x.comÂ
Renting and investing the difference in the S&P 500 beats buying a home over the long run. Against a $398,000 median home at a 6.51% mortgage, a renter saves $1,280 a month plus $51,740 of upfront costs; at 10% S&P returns versus 3.4% home appreciation, the renter is ahead by $1.39M after 30 years, and still wins at 5% appreciation. Real Durham, NC listings, after rising rent, taxes and selling costs, still leave the renter $1.19M ahead, though results vary by market and discipline. x.com x.comÂ
US homebuilders remain a place to avoid as Fed Chair Warsh's rate hike lands on an already weak housing market. Lennar reported orders down 9%, incentives running at 12% of the sale price and mortgage rates near 6.8%. x.comÂ
Homebuilders like D.R. Horton look ugly while rates weigh on them, and it is not time to buy yet. D.R. Horton may soon become an ugly long-term buy, but not yet. x.comÂ
Home construction stocks are rallying as money rotates into under-owned, lower-volatility areas, helped by earnings. Regional banks, transports and medical devices are ripping too, while overcrowded, highly margined growth-at-any-cost areas such as semiconductors are being unwound. x.comÂ
Zillow's real lock-in is winning in rentals and mortgages, which the market does not see. As with Spotify in 2023, the stock is hated while the company outgrows its market, operating leverage kicks in and layoffs have been announced. If housing volume recovers and residential growth reaches 20%+, it becomes a rocket ship. x.comÂ
Homebuilders should benefit as the dollar falls, yields hit a wall and bonds catch a bid. Industries that gain from fading yields and a weaker dollar should stay the hottest hand for the coming months, and multi-month accumulation without selloffs reveals what the market is pricing in, beyond the headlines. Homebuilders, tied to mortgage companies, generally do well in this period; they may not offer the biggest gains but are less volatile than other lower-dollar plays. x.com x.com x.comÂ
