Reading the Housing Sector: The Good, the Bad and the Surprising

Escalating inflation and tighter monetary policy appear to have shaken investors’ confidence in the housing sector. For many, a big question looms large: how solid is the housing sector? We recently gathered our macro, credit and securitized analysts to dive into this question. In short, we think the sector should hold steady with good structural trends, potentially a bad environment if you are looking for housing bargains and a scenario for surprisingly prolonged consumer price inflation. Here are our takeaways.

Good Structural Trends

We believe high house price inflation and higher interest rates will likely restrain home sales, and therefore be a headwind to GDP growth. However, consider the long-term structural housing trends that have shaped the sector to date. These include demographic shifts and chronic underinvestment in housing since the global financial crisis (GFC). We think both should support sector fundamentals and limit the sector’s downside (Loomis Sayles Blog: Don’t Discount Structural Housing Trends, May 2022).