Year-to-date, we have observed steady housing statistics. Toll Brothers (TOL) is continuing this trend with reservation deposits up 25% year over year. Gross margins for new homes, for both single and multifamily units, remained in a stable range as well. The company reported strength in regions spanning from California to city living engagements in and around New York City.
Despite the specter of rising rates, mortgage availability and affordability remain historically attractive. In addition, inventory tightness is still seen in the faster-growing metropolitan areas in the country. This is a sea change from the speculative building environment we saw more than a decade ago.
Demographics and wages are also quite supportive of household formation and homeownership potential. In all, things seem under control in the housing environment. Despite pockets of luxury softness in areas like New York City, where apartments were built for Russian oil barons and Internet tycoons, supply remains on the tighter side for average folks like us.
As supply is relatively tight for new construction in desirable metro areas, repair and replacement trends for the existing housing stock remain strong -- again, supported by price stability, relative affordability and taste and style shifts.
The stocks have been relatively sturdy as well. So I'm looking for unique assets in secularly growing areas. Whirlpool (WHR) is on this list. This global behemoth is trading at a meaningful discount to other stocks like Mohawk (MHK) and Fortune Brands (FBHS). Whirlpool has solid positions in the global appliance market. New products in key areas like laundry and cooking/refrigeration have been taking share from the Koreans, like LG and Samsung, who have been primarily competing on price. Whirlpool's multiple can continue to expand in this environment, and the stock could move into the $200s.
Nortek (NTK) is also on this list. First pointed out here, it's an under-the-radar name in HVAC trading at a material discount to others like Lennox International (LII). This morning, Nortek bought a language-processing platform, Nuiku, to integrate speech recognition into the red-hot home automation theme.
Nortek and Whirlpool are very well positioned in their markets. They are also less-popular but high-quality ways to invest in the housing, repair/replacement and home automation trends, as these drivers continue apace.
