LGIH: Houston etc. Housing Cycle

Good pertinent article. Saul, in your opinion, given the cyclical nature of housing and the last sentence in this post, does this cause concern for position size, etc. for someone who is considering initiating a position in LGIH at the present time?

Houston and other housing market locations from Builder Magazine Sept. 22, 2016

…Other markets nearing the end of Expansion and beginning of Exuberance are Denver, Nashville, Los Angeles, and Washington D.C. Houston is the only market on the brink of collapse.



I am extremely suspicious about that article: No facts. Not even one. Just an out of context quote and a figure that is so small it is unreadable. A figure where the source image was deliberately made difficult to access (so you can’t look at it too closely maybe?).

Ignoring that, the whole article is odd to me. Is demand strong or not? The article seems to say both at the same time. Why is an “Exuberance” phase bad? The figure (once you do finally find the original image) says to me that an exuberance phase is bad because people spend more money. Maybe that is a bad thing for home buyers (higher prices) but certainly not for a home builder (the recipient of the exuberance).

As for LGIH specifically, “rising prices” is mentioned in both the article and the image. Again a negative for a home buyer but not necessarily for a builder. Yes, this may mean some people will not buy a house at all but it also means other people will look at more affordable houses first (which LGIH provides) before deciding not to purchase at all.

Please correct me if I am misunderstanding something but I don’t see anything worthy of paying attention to in that article.


We might have some issues in Houston, but our housing market is not on the brink of collapse. It does feel like the rally could be nearing an end and prices do seem to have increased dramatically over the last few years in my part of town. Additionally, a few years ago houses in my neighborhood would sell very quickly, It now seems to be taking a few months, but they re still selling. My neighborhood is an older established neighborhood with large houses. So it is very different from the market for LGIH.

The commercial rental market seems to have been hit harder by oil than housing. My firm recently renegotiated our lease at a lower rate than from 5 years ago. Shell also announced it is moving out of one its named buildings in downtown and will move people to the westside campus.


I agree with Othalan…the article is suspicious.
Also, I believe the last sentence of the article states that a collapse in Houston likely will not happen…which seems to contradict the whole premise of the article.