Below is a chart and brief excerpt from today's Early Look written by Housing and Financials analyst Josh Steiner.
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This reshaping of the workplace will drive rural/exurban/suburban real estate demand for decades until the arbitrage spread narrows considerably. With national inventory at 40-year record lows currently, the only solution is to increase production – a process which has been structurally stymied by regulations. While NIMBY (Not In My Back Yard) used to be the mantra, today it’s BANANA (Build Absolutely Nothing Anywhere Near Anything). This regulation-induced supply constraint, aka artificial scarcity, puts the homebuilding industry in the driver’s seat and goes a long way towards explaining why, as a sector, housing has rivaled Tech over the last three years. Nothing about that equation is poised to change in 2022 or 2023. In fact, the setup arguably becomes more favorable with massive GSE conforming loan limit bumps for 2022, underwriting standards set to ease meaningfully, looming student loan forgiveness, probable low-income buyer assistance programs, increasing institutionalization of single-family as a rental asset class, and demographic tailwinds through 2025 of would-be first time homebuyers set to gobble up everything in sight. For this reason, we expect to see Housing remain near the top of the leaderboard, likely alongside Tech (though not in Quad 4 for Tech), for the foreseeable future. It’s also worth noting that Housing has historically performed best in Quad 1 and Quad 4 regimes. Our outlook for Q1 is Quad 1/Shallow Quad 4 and our outlook for Q2 is Quad 4. |
