JEFF GUNDLACH: Short The Homebuilders
Jeffrey Gundlach
Bond god Jeffrey Gundlach, the CEO of DoubleLine Capital, is bearish on single-family homes.
Gundlach said single-family housing is “over-believed and over-rated.”
His trade is to short XHB Homebuilders ETF.
It’s trading down about 1.3% today.
During his presentation, Gundlach highlighted a bunch of housing data points.
“We seem to be on the cusp of something of a change with existing home sales now negative,” he said.
He pointed out that new home sales also falling.
He said that the bulls use affordability for their argument. However, Gundlach believes that affordability is “bleak.”
Gundlach said that young people were scared by the housing crisis, so they’re not buying homes. Instead, they’re renting because that’s much more appealing.
He doesn’t see homeownership rates rebounding any time soon.
If Mr. Gundlach is correct, will this lead to some downside pressure on mortgage rates do you think?
Renting is also much, much more flexible. What many people are seeing is the Democrat Urban Model failing them. The cities run by Democrats are expensive and services are plummeting. Who wants to be trapped there?
A tenant can, even in the middle of a lease, up and leave the city or state for a new or better job. What landlord is going to sue in federal court or pursue a debt across state lines? Not for residential rent rates. It doesn’t pay and it will never or rarely show up on a credit report if you do. Landlords aren’t that sophisticated or interested.
You cannot do that with a mortgage. The consequences are dire. Incentives work, just not always the way you think they will.