Investor Focal Points To Start 2021

With record low housing inventory, we anticipate any weakness in the MoM data to be attributed to low inventory levels and/or regional economic restrictions due to Covid-19. Otherwise, Housing Starts and Building Permits data, combined with record-low mortgage rates are supportive of a continued housing sector uptrend into 2021.

In previously speaking to the mortgage forbearance issues, the latest McDash Flash Forbearance Tracker found that forbearance plan volumes ticked upwards for the third week in a row, rising by 15,000 from the prior week and pushing the number of active plans to its highest level since early November.

This week’s increase was primarily the result of limited forbearance plan removal activity, with removals falling to their lowest level since the start of the pandemic, likely due (at least in part) to the holiday week. On a bright note, forbearance plan starts also hit their lowest level since the pandemic began, a number also likely impacted by the holidays. Forbearance start volumes have now fallen in each of the last three weeks running.

Despite 3 consecutive weekly rises, the number of active plans only stands 13,000 higher than the same point last month, and with nearly 270,000 forbearance plans still set to expire at the end of December, it’s possible that we could see an inflow of forbearance plan removals over the first week of January, a situation Black Knight experts will continue to monitor. s of Dec. 29, some 2.83 million (5.3% of) homeowners remain in COVID-19-related forbearance plans.

Research Report Insight #6

Previously, FactSet was forecasting an earnings decline of just over -10% for the Q4 period. As of December 18th, however, FactSet shows an earnings forecast of a -9.7% decline.

  • For CY 2020, analysts are projecting an earnings decline of -13.6% and a revenue decline of -1.8%.
  • For Q1 2021, analysts are projecting earnings growth of 15.6% and revenue growth of 3.6%.
  • For Q2 2021, analysts are projecting earnings growth of 45.0% and revenue growth of 13.7%.
  • For CY 2021, analysts are projecting earnings growth of 22.1% and revenue growth of 7.9%.

Research Report Insight #7

While there are certainly parallels to the past, every time is different and 2020 has been the embodiment of that principle.

  • During the 2008 recession, we saw a larger earnings collapse (-40%), but stocks fell 38.5%, meaning multiples only expanded slightly (from 17.8 to 18.2).
  • During the 2001 recession, earnings also fell more than this year (-30.8%). But again, stocks declined 13% in 2001, meaning a smaller multiple expansion (23.5 to 29.6).

The difference in 2020 has been that while earnings have declined 23%, stock prices have risen 13 percent. We saw something similar to that in 1991 at the end of the 1990-91 recession, where earnings declined 14.8% while stocks rose 26.3 percent. In 1991, however, P/E ratios expanded from 14.6x to 21.6x. This year they have moved from 20.6x to 30.3x. (Charlie Bilello)

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