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Jeff Gundlach's Bearish Homebuilder Call (In 1 Chart)

Tyler Durden's picture




 

While Jeff Gundlach's against-mainstream-consensus bearish call on the homebuilders (and over-rated housing recovery) will come as little surprise to regular readers of Zero Hedge, we thought the following chart might provide one more simplifying perspective on his call for lower prices in homebuilder stocks...

 

As Bloomberg notes, if history is any guide, the homebuilder ETF has fallen at least 10% from its Q2 highs during each of the last few years (even as the bull market progressed)

 

 

The chart shows the ETF’s closing prices from April 15 to July 15 annually since 2009, when the bull market started. The period’s biggest decline was recorded in the second year, when its shares fell 29 percent from April 23 through July 6.

“Single-family housing is overrated,” Gundlach, chief executive officer of DoubleLine Capital LP, said yesterday in a speech at the Sohn Investment Conference in New York.

He called for selling the ETF short, or borrowing and selling shares to profit from lower prices.

 

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Wed, 05/07/2014 - 18:05 | 4737478 HedgeAccordingly
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He is good . But he allocates small beans to these trades. He knows he will get free pr http://hedge.ly/1mzei8L

Wed, 05/07/2014 - 18:21 | 4737524 NotApplicable
NotApplicable's picture

I'd call that chart bullish. Exactly how many empty houses does it take to generate a recovery, again?

Wed, 05/07/2014 - 18:46 | 4737616 Slave
Slave's picture

All of them.

Wed, 05/07/2014 - 18:07 | 4737481 puskin
puskin's picture

Things are bad in California

$1000/mo. is the floor for one bedroom apartments.

Lots of new building but not single family homes- all multi unit apartments to rent out to college grads making $17/hr.

Things fall apart, the center cannot hold

 

 

Wed, 05/07/2014 - 19:13 | 4737694 Everybodys All ...
Everybodys All American's picture

They can't seem to build enough multi fam units. I've seen very few single family homes being built. The new normal reminds me of the low income housing in the 60's except these buildings are not of the high rise variety.

Wed, 05/07/2014 - 22:32 | 4738397 Dutch
Dutch's picture

It is low income housing of sorts. Huge number of units, packed in together, near freeways and trolley stops. This is by design. Single family home suburbia breeds terrurists or something.

Gundlach is all about p0rn, booze, cigars, wild music, and crazy art (according to his old employer). Also gutsy calls and often right with them. Sounds like a fun guy to hang out with once in a while. Lots better than Bill Gross' dead cat stories.

Wed, 05/07/2014 - 20:55 | 4738099 Remington IV
Remington IV's picture

I'd rather live in mexico than California

Wed, 05/07/2014 - 18:37 | 4737567 Al Huxley
Al Huxley's picture

He's not taking into account the demand lag caused by the colder than average weather in Q1.

Wed, 05/07/2014 - 18:40 | 4737578 ebworthen
ebworthen's picture

Bullish for shingle family hums.

Wed, 05/07/2014 - 18:47 | 4737620 Ban KKiller
Ban KKiller's picture

With a shitgum in every closet.

Wed, 05/07/2014 - 18:58 | 4737646 Rainman
Rainman's picture

McDoublewide in every trailer park !

Wed, 05/07/2014 - 22:45 | 4738446 ebworthen
ebworthen's picture

I loved me my little double-wide; great insulation, one level, dirt cheap.

Wed, 05/07/2014 - 18:57 | 4737649 Captain Queeg
Captain Queeg's picture

When Gundlach is short the Shitgum ETF, I will be out. Not before.

Wed, 05/07/2014 - 18:48 | 4737623 Madcow
Madcow's picture

A house built by a traditional home-builder costs around $250,000 - and requires all kinds of labor, permits, engineering stamps, etc. - can can take 6 months to a year to complete.

 

Now, a 3d printer can get the same job done in a single day for $5000 - and requires no workers. 

 

http://news.xinhuanet.com/english/sci/2014-04/25/c_133290171.htm

 

 

Wed, 05/07/2014 - 19:04 | 4737670 Captain Queeg
Captain Queeg's picture

No workers, come tha F on. Either the printer produces components which need to be assembled (workers), or the house will disintegrate with one well-placed punch.

Wed, 05/07/2014 - 19:17 | 4737716 Everybodys All ...
Everybodys All American's picture

Just use the cardboard box it comes in.

Wed, 05/07/2014 - 22:22 | 4737793 AdvancingTime
AdvancingTime's picture

Sorry pal I beg to disagree. I'm aware of the process you write about but it is not as simple as some people might think or have you believe. Having said that I do see great promise in this idea.

Wed, 05/07/2014 - 19:43 | 4737827 AdvancingTime
AdvancingTime's picture

I have owned an apartment complex for many years and we are currently experiencing the largest number of vacancies we have ever had. Many houses in the area are empty or under leased. In 2005 and 2006 prior to the housing collapse many people were looking at second homes, for investments or as a vacation getaway.

Today not only have many people shed the extra home many have doubled up with family or friends reducing the need for housing. We are pushing on a string and calling it demand when someone who can barely pay the rent is encouraged by the government to buy a house they can neither afford or maintain. We have a shortage of "qualified" buyers and renters. More on how low interest rates are hurting housing in the article below,

http://brucewilds.blogspot.com/2013/12/super-low-interest-rates-disservi...

Wed, 05/07/2014 - 23:20 | 4738553 FreedomGuy
FreedomGuy's picture

In my city they seem to be building like it is 2007 all over again. Condo's seem to be quite the rage here and I wish I knew how many units compared to population increases. I suspect the supply and demand are not well aligned.

Your radar should go up when the charts show declining average incomes and inclining home prices. There is no mathematical way that can hold over time. When it crashes again there will be more not fewer properties to clear.

Thu, 05/08/2014 - 05:30 | 4738933 waterdude
waterdude's picture

XHB 09-13fy avg performance april15-july down a whole 78bps vs 10% downmove since End Feb...not zactly compelling is it?

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