Logan Mohtashami, lead analyst at HousingWire, said the recent wave of acquisitions across the housing industry is not a signal of an imminent housing recovery but rather a long-term bet on the sector’s future growth cycle.
Speaking on CNBC’s Closing Bell Overtime on Tuesday, Mohtashami said consolidation is spreading across nearly every part of the housing ecosystem, including homebuilders, real estate services and mortgage companies.
“I think every part of real estate and mortgage is in play,” Mohtashami said, adding that he expects more consolidation ahead.
He pointed to recent deals across the sector, including the acquisition of Redfin Corp by Rocket Companies, Inc. (NYSE:RKT), the parent company of Rocket Mortgage, and the purchase of housing data company Zonda.
He said these transactions are positioning companies for the next housing cycle over the next five to 10 years rather than reflecting short-term market strength.
Mohtashami said the housing market remains sluggish. New-home sales are still roughly in line with 2019 levels, while existing-home sales continue to operate near historically weak levels. He described the existing-home market as the more important indicator of overall housing conditions.
Affordability Improves, But Slowly
Mohtashami also said that mortgage rates rising above 6.75% appear less likely now, even as inflation remains elevated. According to him, improving mortgage spreads have helped prevent rates from moving above 7%, providing some support for housing demand.
He added that inventory levels have improved significantly and that the severe housing shortage seen in recent years has largely faded. Home-price growth is slowing, wages are growing faster than home prices and affordability is gradually improving. Lower mortgage rates could provide a modest boost to sales, he said.
Recent housing data has pointed to similar pressures. The U.S. Census Bureau reported that new-home sales fell 6.2% in April as elevated mortgage rates and affordability challenges continued to weigh on buyers.
Corporate commentary has also highlighted a softer housing backdrop. Home Depot Inc. (NYSE:HD) executives recently said homeowners continue delaying larger renovation projects because of affordability concerns and a sluggish housing market.
Meanwhile, affordability remains a key challenge. Zillow Group Inc. (NASDAQ:Z) CEO Jeremy Wacksman recently said affordability continues to keep many potential buyers on the sidelines, while Anthony Scaramucci argued that many households can no longer comfortably afford the median-priced U.S. home.
Mohtashami’s comments also come amid rising consolidation across the sector. Earlier this week, Berkshire Hathaway agreed to acquire Taylor Morrison Home Corp. (NYSE:TMHC) in an approximately $8.5 billion all-cash deal, one of the largest housing-sector transactions this year.
Disclaimer: This content was produced with the help of AI tools and was reviewed and published by Benzinga editors.
Image via Shutterstock
Recent Comments