R59, re exuberant house prices. I read articles like this and also watch videos on YouTube warning that a housing crash is coming later this year.
I also read virtually every earnings release and conf call from the homebuilders. It's two different worlds. Yes, home prices are running higher and higher. Normally builders would step right in to meet demand but they can't even keep us with orders due to supply chain and labor shortages. So they keep raising prices to ration demand. Many people believe rising mortgage rates will kill demand, yet several of the builders have done stress tests and don't see any real drop off in demand until rates hit 6% or so. Even then buyers have different options like going to smaller house plans, fewer options or ARM mortgages.
Basically there is a shortage of 1.5 million homes because builders did not keep up with demand for over 10 years. So now we have home builders trading at or near 52 week lows while they are earning record high profits. Analysts expect profits to increase again this year and also next year as well (2023). Investors like wade aren't buying it so we have the group trading at record low PEs. MHO , for example, is trading at a PE under 3 and also well below book value (.78X BV). That's crazy cheap IMO.
I'm not selling at these bargain basement prices but not adding either; not until investor perceptions appear to have bottomed.
