To The Moon

In a seemingly never-ending bear market, U.S. housing stocks bucked the trend and surged to new highs. This is indeed an anomaly, after all, if there is a recession, the housing market will be the first to suffer.

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Of course, existence is reasonable, and what investors have to do is to find out the reasons behind the sharp rise in housing stock prices.

• First, the housing market remains relatively strong. Housing prices are rising, and inventory remains scarce. It is not easy for home buyers to find a house, which naturally drives house prices to rise further.

• Second, under the turbulent market, investors' demand for safe haven has increased. Housing stocks are relatively safe investments, so they may have attracted the attention of some investors.

Whether the trend will continue is unclear, but if housing stocks continue to surge, it could be a sign that the bear market is drawing to a close.

Homebuilders $SPDR S&P Homebuilders ETF (XHB)$ Up 18.5% YTD ，U.S. homebuilding ETF $iShares U.S. Home Construction ETF(ITB)$ up more than 26% , High-growth technology stocks in the housing sector gained even more, with shares of $Compass, Inc.(COMP)$ up 70%, Shares of $Opendoor Technologies Inc(OPEN)$ , an online real estate buying and selling platform, will rise 104% in 2023，The stock price of $Redfin Corp(RDFN)$ , a digital listing company, soared nearly 150%.

Data as of 19 May 2023

Housing stocks, you might say? honestly? Isn't the mainstream media saying that the housing market is going to collapse every day?

But if you look at the data, the housing market is at the beginning of a massive recovery. That's why housing stocks have skyrocketed this year and will continue to soar for the foreseeable future.

Housing market recovery in 2023

There is no dispute that the housing market will collapse in 2022, but the rebound and recovery in 2023 is also undisputed.

Looking back at the housing market last year, rising mortgage rates, a slowing economy, soaring housing prices, and strong expectations that housing prices will fall in the near future all put enormous pressure on the housing market.

However, this year, mortgage interest rates have stopped rising, and the average 30-year fixed-rate mortgage interest rate has dropped from 7.2% at the end of 2022 to the latest 6.2%. The economic slowdown has also stopped, with the New York Fed's weekly economic index falling from 6% to 1% in 2022, and has remained stable near 1% since December. Housing prices are no longer soaring. Price growth averaged 15 percent last year, compared with just 0.4 percent the previous month.

Consumers also no longer expect the housing market to crash. Median expectations for home price growth over the next five years fell to a record-low 1.1% in late 2022, but have since bounced back to normal levels of 2.7%, according to the University of Michigan.

In other words, all the factors that put pressure on the housing market last year will all "reverse" in 2023: mortgage rates are falling, the economy is stabilizing, housing prices are falling, and housing price expectations are rebounding.

As a result, hell would happen if the housing market didn't bounce back.

The most comprehensive measure of the health of the housing market, the NAHB homebuilder sentiment index rose to 50 in April, rising for the fifth straight month and entering expansion territory (50 and above) for the first time since mid-2022.

A drop below 50 would signal the start of a cyclical housing bear market, while a rise above 50 would signal the start of a bull market.