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U.S. Insights – Housing: Needs a New Front Door, Not a Teardown

— Jefferies U.S. Equity Research

Jefferies published a collaborative report on the U.S. housing market where affordability concerns and weaker metrics have led to market uncertainty. The backdrop is compelling, though, with Millennials seeing above trend income growth just as this most populous tranche reaches household formation age. While the longer-term demographics favor homeownership, REIT analyst Tayo Okusanya pointed out that the decline in affordability and low housing inventory may continue to favor rentals and, therefore, apartment REITs. Building Products analyst Phil Ng believes builders will pivot toward more affordable housing, though evidence of that trend may take several quarters to show, and he highlighted SKY, MAS and FBHS in the current environment. Consumer analyst Jonathan Matuszewski believes FND overly discounts housing risks, especially as factors other than housing turnover correlate better to sales growth for the compan. FULL REPORT