Bond manager Jeff Gundlach is famously bearish on housing these days.
He recently argued in favour of shorting the homebuilders:
[Gundlach] 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.
On BloombergTV this morning, investor Bill Miller was asked about Gundlach’s call.
First, Miller chuckled about the idea of a bond manager being an expert on housing stocks.
Bigger picture though is a good point: What Gundlach says is bad (low affordability and lack of interest in buying homes) is actually bullish. That’s because this all represents pent up opportunity.
The bearish headlines were in 2006 and 2007 when everyone wanted to buy a home, and everyone could get access to a home if they wanted. Now it’s tough to get a mortgage and everyone wants to rent, which means that there’s a lot of improvement left in the industry.