Homebuilders: Growth At Very Reasonable Prices
- Left for dead early in the pandemic, the U.S. housing industry has been a consistent, steady-handed leader throughout the pandemic. After a summer lull, the positive momentum has again accelerated.
- Record-low supply levels and robust single-family housing demand remains a secular tailwind. Rental markets were a brief reprieve from cost-pressures, but soaring rent rates have pushed households back towards ownership.
- Homebuilders are selling homes as fast as they can be built, but that's not fast enough. Supply chain constraints have curtailed immediate upside, but may have prolonged the favorable cycle.
- Profit margins have climbed to record highs as builders have more-than-offset cost pressures through higher sales prices. Scale remains a critical competitive advantage as the larger public builders continue to gain market share.
- Growth At A Very Reasonable Price: Homebuilders remain an unloved sector, still trading at deep discounts to historical and market multiples - including mid-single-digit P/E ratios - despite double-digit earnings growth expected over the next several years.
