So we have more affordability of credit -- something confirmed by Richard Smith, CEO of Realogy (RLGY), the nation's largest real estate broker -- and a slightly higher price of homes year over year, as well as interest rates still at historically acceptable levels. That combination means the housing industry remains on a growth track.
I think that strength's not in Lennar's stock or in the zeitgeist of the investing public, which remains convinced of the long-lasting damage that the rate increase is causing. Lennar, and to some extent KB Home (KBH), have shown this: Unless rates go up again, business will be just fine. They show that, after a gigantic pause when the homebuilders bided their time, they are now ready to advance, even if rates go back to where they were a couple of weeks ago.
Lennar in particular has an excellent perspective on things, because it is also a huge builder of apartments and it provides housing financing. There simply is no reason to believe that Miller's view can be questioned. I didn't feel that way after the previous quarter, because I was worried about the rate increases coming, as a tapering from the Fed seemed to be in the cards.
Now that the market has boosted rates already, it looks to have been digestible -- certainly more digestible then the common wisdom holds.That means this group, and all of its accoutrements, can be owned again. July was aberrant, for certain, but the rates haven't defeated the home buyers. Meanwhile, the lack of supply should allow the home resurgence to last far longer than people expect. That's particularly so for those who believe there are now bubbles all over the place and prospective homebuyers have been defeated by the higher rates now prevailing across the country. The Lennar release, the conference call and the interview, I thought, made for an irrefutable thesis. The industry can be "go-to" once again after a prolonged period in the wilderness. At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, had no positions in the securities mentioned.
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