market folly

We're posting up notes from the Sohn Investment Conference in New York, produced in partnership with Bloomberg LINK.  Next up is Jeffrey Gundlach of DoubleLine who argued that housing is declining and said to short homebuilders.


Jeff Gundlach's Sohn Conference Presentation

Pitch: Single Family Housing recovery is not happening.  Household debt fell only because mortgage credit dropped due to default.  Housing market has been supported by a surge in second lien financing and cash transactions.  Cash transactions are 50% of deals, up from 20% in pre-2008.  Existing home sales and new ones are weak. Housing starts have improved, but still below 1M per year.

Housing affordability isn't really that good now if you look at the long-term charts. There are no first-time buyers. Household formation is depressed. Young people are staying with parents much longer and have higher unemployment rates. Student loan debt is higher, another headwind. People moving rate has been in decline for decades. Still 19.4% negative equity nationally.

Generational preference shift - young people prefer to rent. He says home ownership rate will DECLINE further, not rebound like most people think. Says the rest of his career we will NEVER see 1.5M housing starts in a year again. IDEA:  Short XHB. 

Be sure to check out the rest of the presentations from the 2014 Sohn Investment Conference.