Shares of DR Horton (DHI) dropped 9% yesterday. The home construction company said margins took a hit as a result of rate buydowns, which provide home buyers lower mortgage rates for a period of time.
“The cost of that in 4Q 2023 was significant, given that’s when rates were really challenging,” explains Financials analyst Josh Steiner in this clip from The Call @ Hedgeye.
“How that manifests was in DR Horton’s margins, and a buying opportunity in Home Construction (ITB),” adds Keith McCullough.
“How it also manifests is artificially inflated housing prices … The one thing that needs to come down a lot for inflation to go down a lot is up. It’s one more example of how two-thirds of Americans aren’t able to buy a house.”
McCullough took this opportunity to buy the dip in housing stocks yesterday.
“That’s how you do it,” Hedgeye’s CEO explains. “Portfolio Solutions subscribers saw me do that.”
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