Gundlach pokes holes in housing recovery at Sohn


"Single-family housing is over-believed and overrated," says Jeff Gundlach at the Ira Sohn Conference. What strength there is or was in housing, he says, came from all-cash transactions (much of it institutional money). "This is not exactly indicative of the organic growth in the market from a real buyer’s perspective.”

New homes sales: "Remarkably weak ... flat on their back just as they were at the depths of the recession."

Affordability: If it's so great, why did last year's interest rate rise hit sales in such a large way?

Wind down of the GSEs: Who knows how this plays out, but it's almost certainly going to result in higher mortgage rates.

"The kids are not alright," he says, and the exit of first-time home buyers is a secular trend thanks to high unemployment and high student debt levels. "Young people were shocked and scarred by the financial crisis ... [renting is] massively  more appealing."

Related ETFs: XHB, ITB, PKB

Earlier Sohn coverage

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Comments (8)
  • bbro
    , contributor
    Comments (11195) | Send Message
     
    "All-cash sales comprised 33 percent of transactions in March, compared with 35 percent in February and 30 percent in March 2013. Individual investors, who account for many cash sales, purchased 17 percent of homes in March, down from 21 percent in February and 19 percent in March 2013. Seventy-one percent of investors paid cash in March."
    5 May 2014, 01:01 PM Reply Like
  • Robin Heiderscheit
    , contributor
    Comments (3137) | Send Message
     
    Last Gundlach point is key . . . young people are gone, gone, gone from home ownership. When you need to preserve the flexibility to move at the drop of a hat to advance your career and spend 9.2% of your pretax income on health insurance (not medical costs, that's a whole 'nother category) and you have to pay for college needless to say homeownership has zero appeal.
    5 May 2014, 01:02 PM Reply Like
  • TWagen
    , contributor
    Comments (162) | Send Message
     
    Amen.... and why others are trying to talk housing up like it is booming again is beyond me. Just accept the reality and move on. Not to mention the demographic changes on the other end of the age spectrum (Older people do not need more homes but will look to divest any that are not needed anymore (i.e. sell the midwest home and move to warmer climates).
    5 May 2014, 01:06 PM Reply Like
  • bbro
    , contributor
    Comments (11195) | Send Message
     
    The Housing Starts to Nonfarm Payrolls ratio today is .69%...the average ratio for the 1990's was 1.17...the range was .73 to 1.40....the .73
    was in January 1991 with a 30 year mortgage rate of 9.64..the 30 year
    mortgage rate today is 4.34%
    5 May 2014, 01:07 PM Reply Like
  • rambler1
    , contributor
    Comments (977) | Send Message
     
    Let's see politicians & the Fed work themselves out of this corner.
    5 May 2014, 01:27 PM Reply Like
  • kmi
    , contributor
    Comments (4562) | Send Message
     
    welcome to why 10 year can't push and hold over 2.70.... and won't, for a rather long time.
    5 May 2014, 02:13 PM Reply Like
  • Ohrama
    , contributor
    Comments (568) | Send Message
     
    Let me add this to BBRO stats. From anecdotal evidence and knowledge about the general market, I can say that good part of the cash buys come from rich first immigrant generation parents of non-caucasian origin who are about to retire funding their kids living, taking their clue (wrongly in my opinion) from places like Bombay or Shanghai where the population density is high (and keeps going higher), inflation is much higher, the resistance for innovations (including moving businesses to a new city etc) is much higher and hence the real estate prices keep going higher and higher. They are playing the US real estate like stock market without understanding these crucial differences and hence will contribute to a big decline when the downturn starts.
    5 May 2014, 04:21 PM Reply Like
  • Kimer62
    , contributor
    Comments (269) | Send Message
     
    Just for the record I think this short is dead wrong! I do believe younger people are struggling and the 30 year old is similar to the 20 year old of twenty years ago, but poor weather have effected this industry and it will break out over the next six months! Long NVR, DHI, FBHS, PGTI, TTS! Housing starts are near 900,000 the average of the last thirty years is closer to 1,500,000!
    5 May 2014, 05:26 PM Reply Like
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