Oppenheimer executive director Tyler Batory says that when it comes to homebuilders, investors always need to be aware of what is happening with interest and mortgage rates. He also points to weakness in the existing home sales market along with strong margins and profitability for the builders as"strong tailwinds" for the space.
So I think you have a lot of tail winds here and a lot of good things that are going on for the space that are really driving the stocks and I think you continue to drive these stocks going forward. So from a financial perspective, if you have a mortgage at 3.5 or three trading that for a 7% mortgage, trading that for a 6.5% mortgage, it doesn't really make a whole lot of financial and that 50 basis point difference isn't really that much of a determining factor.
The advantage is if rates sit down to 6.5, you know, suddenly you're still going to be in the mid fives and you don't have to buy down the rate quite as much.So that I think is something that could really help gross margin, really help earnings especially the rest of this year and obviously into next year as well, depending on what happens with the broader mortgage rate outlook.I know you like Toll Brothers in particular.
And Tyler, another name you like though, Polti, um which has had a strong run, something about 60% over the past 12 months.They have a little bit of entry level, a little bit of that first time, they have a little bit of higher priced homes.
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