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Bouncing back: five years on from Fannie and Freddie
We do not think the housing cycle is over by any means. However, it is obvious to us that the lower end of the market has and will be negatively impacted by the sharp recent increase in the mortgage rate.
The Ignis American Growth Fund still has exposure to this sector, through exposure to the remodelling and repair end of the market, as we expect existing home sales to pick up meaningfully going forward. We have positions in Lowes, the number two competitor to Home Depot, and Mohawk Industries – which is a high quality flooring manufacturer.
We are more circumspect about investing in homebuilders in the short term, as many of them have failed to maintain their land banks over the last few years. They are paying the penalty during the recent improvement in the housing market, as some do not have enough product to sell and are being forced to pay up for lots to develop, which could hurt margins going forward.
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