The housing market is still looking bullish after its big move higher throughout the pandemic. While the rate of home sales and price increases may slow in the short run, a number of factors make this an attractive long-term market thanks to high demand and short supply.
With interest rates remaining low and wages rising, home affordability is also likely to improve, even with recent price increases. That makes housing a solid long-term speculation going into 2022.
However, short-term issues such as supply and labor shortages are creating some fear which is creating a reasonable buying opportunity.
Case in point? Lennar (LEN). The homebuilder missed on both earnings and sales when it reported after the closing bell on Wednesday. Shares dropped nearly 7 percent on the news, although the company has beaten the S&P 500 over the past year.
Action to take: The homebuilder should recover from this earnings-related drop and trend higher in the months and years to come. The long-term outlook for housing suggests a shortage, which should be good for the company’s earnings and profitability in the years ahead. Today’s buyers can also get a small dividend yield of about 0.9 percent.
For traders, a bounce higher is likely in the coming weeks. The May $115 calls, which traded for around $10 before the earnings report came out, is now trading closer to $8. It can likely trend higher in the next few months for double-digit returns.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.