Housing shift?

Hoya Capital posted on SA today a very interesting piece. As having a bit of a view into one of the target age demographics highlighted, I immediately started poking thru their analysis and will continue to do so

Two key quotes – first on the demographics and second on market segments:

“While the “Boomer” generation seems to get all of the attention, the age cohort currently between 25 and 34 years old is significantly larger than the 10-year cohort preceding it, currently aged 35-44. Having entered the labor markets during a historically strong period of economic growth, this cohort is also in far better shape financially across most metrics than the preceding 10-year cohort. This combination of historically low housing supply and strong demographic-driven demand has resulted in a compelling macroeconomic backdrop for companies involved across the US Housing Industry over the next decade, especially companies involved in new home construction.”

“As construction and regulatory costs had risen over the past decade, homebuilders had shifted their focus towards higher-end units which command high enough margins to offset these increased costs. Recently, however, we’ve seen that trend reverse with homebuilders increasingly shifting their focus into entry-level segments where projected demand growth is strongest. That shift is still in the early-innings as these builders are still skewed towards the move-up and luxury segments. According to the Census Bureau, the median new home price was for a newly-built home was $316,700 in October, while the median public builder in our 10-company coverage is $414,000 in 3Q19.”

I’m not ready to jump into this segment with capital, but it surely deserves more analysis to:

  • Confirm Hoya’s analysis
  • Catelog the builders by quality and geography
  • Understand the potential financial returns

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