The potential impact of the 2024 election on homebuilder stocks.

Despite analysts downgrading the investment outlook of both D.R. Horton and Lennar this summer, some investors remain optimistic about the industry's prospects for performance.

Since the 2007-2008 financial crisis, the market positions of top homebuilders have expanded, according to industry observers.

"Luis Quintero, a faculty member at Johns Hopkins University Carey School of Business, stated that many of them were benefiting from substantial liquidity increases due to stimulus packages in the early 2010s, allowing them to utilize these resources at their discretion."

Lower competition among homebuilders may be a factor in the U.S. housing shortage, according to Quintero's research.

Restrictions on supply are slowing homebuilding

To curb the recent increase in housing prices, the United States must quickly construct numerous new homes.

According to Tobias Peter, co-director of the American Enterprise Institute's Housing Center, the estimated supply shortage of housing units ranges from 2 million to 8 million, with some people putting it even higher at 20 million units.

The permit approval process, which can slow down projects in areas with restrictive zoning laws, is a contributing factor to the long-term shortage, according to some experts.

Whelan Advisory's founder and CEO, Margaret Whelan, stated that regions with greater expanses of open land and more relaxed regulations are experiencing a higher volume of home sales.

"In Texas, land decisions are made more quickly than in California, according to Whelan."

The number of permits issued for new residential projects has decreased since 2021 due to the combined effects of high mortgage rates and rapid home price inflation, which have made it difficult for many potential buyers to enter the market.

Zoning proposals in the 2024 election

The views of Vice President Kamala Harris and former President Donald Trump on zoning reform could impact the speed of residential construction.

Harris pledged to end America's housing shortage by relaxing zoning laws and providing subsidies to builders during her campaign.

At the Republican National Convention in July, former President Trump criticized the Biden administration for its efforts to bring more dense forms of housing to suburban areas and for the current inflation situation, which has affected key costs including housing.

What is slowing down homebuilders in the U.S.?