Housing – When will the comeback story be written?

I look at the giant housing market here in the US like a prized fighter that has seen better days. The complacency is easy to see when you compare it to other fighters (like Canada) who’ve trained harder and set higher standards, such as requiring 20-30% down payments. However, all good prize fighters don’t stay down too long and eventually bounce back. I still think that the US housing market needs to see improvement in areas such as jobs and foreclosures but this fighter is getting its feet back underneath him. As usual, I’ll remind you to not listen to the Wall Street hype men out there who are always trumpeting that everything is great in housing, look where that would have put us 2-3 years ago. You have to always do our own research! I have not done a large amount of research but I think the housing market will make a comeback similar to LL Cool J’s return on ‘Mama Said Knock You Out’. His famous opening lines on that track were: “Don’t call it a comeback; I’ve been here for years”. Month after month, I recall mental notes and try to catch themes that are occurring. In March, I wrote a post that included a bullet point on how I am oddly finding a positive spin on what many see as a very negative stat. Click here for those March Notes. I follow up that post with new information that just came out for April which continues to highlight housing starts and permits are falling. Why is this bad piece of information, good? I’ll keep it simple, I’m not waving the buy signals but this is a positive step in the right direction, because fewer houses being built means we can continue to clear the overhang of existing homes out there and one day get back to normal.
Who’s Got My Back…maybe David Tepper
David Tepper may be with me as I start to review some of his latest holdings. Mr. Tepper is a well known investor who founded hedge fund, Appaloosa Management. His Wall Street credentials are legit and his $55 Million dollar donation to have Carnegie Mellon name its business school after him is just one example of his success. Tepper every quarter has to file documents disclosing which stocks that he owns and here is a summary of some of the surprising housing related stocks he now owns as of last quarter:

PulteGroup (NYSE: PHM) – 1.6M+ shares
D.R. Horton (NYSE: DHI) – 1.3M+ shares
Beazer Homes (NYSE: BZH) – 1.3M+ shares
Masco Corp. (NYSE: MAS) – 394K shares
Ryland Group, Inc (NYSE: RYL) – 198K shares

While large to the average investor, in reality this is a small stake for Mr. Tepper as all these shares add up to about $55M. While this is not a knockout of an endorsement for housing, it very well could mean we are in the first round of a prize fighter returning.