Multifamily Home Construction 'Peaked, Will Fall,' RBC's Wetenhall Tells CNBC

The Commerce Department's June housing data shows 'rent fever' is over and multifamily construction is not an area to invest in, RBC Capital Markets' Robert Wetenhall said on CNBC today.
By Lindsay Rittenhouse ,

NEW YORK (TheStreet) -- The Commerce Department's June housing data released this morning showed that multifamily construction has "peaked and this is the beginning of the fall," RBC Capital Markets' Robert Wetenhall told CNBC's Tyler Mathisen on "Power Lunch" Tuesday.

"Right now we're going to see a big mid shift. We think number one, housing recovery: stronger for longer but beneath that there's a material makeshift toward single family detached away from multifamily construction activity. It's great for home ownership, it's bad for rental vacancy rates," Wetenhall said.

As both the price of renting and new home ownership affordability rise, the current beneficiaries will end up being renters turned home owners, he continued.

"This imbalance has to normalize over time. Rents are going to come down," Wetenhall explained.

Housing starts in June reached an adjusted annual pace of 1.19 million units, compared to analysts' expectations of 1.17 million. The largest driver of the data, groundbreaking on single-family homes, grew 4.4% to a 778,000-unit pace, according to the Commerce Department.

"Rent fever is over man and so is multifamily construction," Wetenhall warned.

Invest in "well-positioned" single-family home builder stocks such as D.R. Horton (DHI) - Get Report , he advised.

Shares of D.R. Horton are rising by 0.38% to $34.08 this afternoon.

Separately, TheStreet Ratings rated D.R. Horton as a "buy" with a score of A.

This is based on the convergence of positive investment measures, which can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, impressive record of earnings per share growth and attractive valuation levels.

TheStreet Ratings feels its strengths outweigh the fact that the company shows low profit margins.

You can view the full analysis from the report here: DHI

TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.

Loading ...