Home buying has kept shrinking, with existing home sales in October at their lowest since 2010, signed contracts at a 25-year low in September, and Fannie Mae raising its 2027 mortgage rate forecast. Yet shares of the title insurers and builders have climbed while the S&P 500 fell. Mortgage rates have eased four weeks running, lifting home-purchase applications by the most since mid-April, a sign the squeeze could ease.
Updated Nov 13
Insurance - Specialty, Residential Construction
The reasoning of the connection that opened this thesis. It is not updated.
In late 2023, when mortgage rates last neared 8%, builders leaned on rate buydowns to keep selling.
Both title insurers grew revenue in the quarter to June 30, by 15% at First American and 11% at Fidelity National, even with rates already high. That suggests other parts of their business may cushion a slowdown in home deals. Fidelity National also holds a majority stake in the publicly traded F&G annuity business (NYSE: FG), which tends to benefit from higher long-term yields, so the net effect on it is less clear than for First American.
26 for · 2 against
Mortgage rates rise to 7.49%, which lowers what buyers can afford and pushes homebuilders to spend more on rate buydowns or sell fewer homes.
Fewer home purchases and fewer refinancings reduce the number of property deals that close.
Title insurers like First American Financial and Fidelity National Financial write fewer policies, because each premium is tied to a closed deal.
Average move since Tenji added each name: -8.5% · S&P 500 since the thesis opened Oct 7: -2.9% · 0 of 4 names moving with the thesis
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