Views From The Experts
Dave Goodson
Head of Securitized Investments,
Voya Investment Management, Portfolio
Manager, Voya Intermediate Bond Fund
The U.S. Housing Market: What Historical Data Reveals About The Path Forward
On the surface, it’s easy to see why many investors believe the “housing trade” is nearing its end. Home values have reached levels set during the pre-crisis peak in July 2006. Total household debt is roughly the same as it was in 2007.
In isolation, these two metrics suggest that the housing market has moved well past the “recovery” phase. However, a closer look at the broader macroeconomic backdrop tells a much different story:
• The U.S. population has grown by 24 million people, an 8% increase from 2007
• The U.S. labor force stands at 160 million, which is 7 million more than the labor force in 2007
• The current number of households and nonfarm payrolls are higher, by 9% and 5% respectively
• At nearly $19 trillion, GDP is 28% higher than it was in 2007 The current backdrop should provide ample dry powder to support continued demand for housing. We believe this will allow the housing market to move past the high-water marks set in 2006. It’s also important to note that the recovery has been achieved under a greatly enhanced regulatory regime, which was redesigned in the wake of the credit crisis and deployed in recent years. With stricter lending dynamics in play, leverage is less and mortgage loans exhibit credit characteristics vastly superior to those underwritten before the financial crisis.
It’s equally important for investors to consider that mortgage loans are just one of the many ways investors can access securitized fixed income. For a securitized allocation to be successful on a standalone basis or as part of a broader multi-sector fixed income strategy, we believe managers need to have exposure across the various securitized sub-sectors and tactically adjust allocations based on the most attractive opportunities and perceived relative value at any given time.
This commentary has been prepared by Voya Investment Management for informational purposes. Nothing contained herein should be construed as (i) an offer to sell or solicitation of an offer to buy any security or (ii) a recommendation as to the advisability of investing in, purchasing or selling any security. Any opinions expressed herein reflect our judgment and are subject to change. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. The opinions, views and information expressed in this commentary regarding holdings are subject to change without notice.
Past performance is no guarantee of future results.
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