Mortgage rates have ticked up this week, with the 30-year fixed rate sitting at 6.86%. Toggle AI chief market strategist RJ Assaly joins Market Domination to analyze the state of the housing market and where buying opportunities lie for investors.

Assaly points to homebuilders as a good opportunity despite their recent underperformance. He explains that interest rate cuts from the Federal Reserve will likely make mortgages more affordable, increasing the demand for homes. He adds that lumber has been down, but the tide is beginning to turn, which is good news for homebuilders.

He says that rate cuts, in particular, will be a major factor in the housing market, explaining, "On the macro side, you've seen this sort of lock-in of mortgages where people who have had very low rates on their mortgages being unwilling to move. And you're starting to see even with the wage increases and wage pressures, hopefully, the mortgage rates coming down sort of helps that problem of job mobility and people moving and help with the volume of housing that's turning over."

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Melanie Riehl

Video Transcript

Mortgage rates ticking up this week with a 30 year fixed at 6.86% once rates eventually ease and buyers enter the market that could be beneficial for home builders in more ways than one.

And joining us now is RJ Oley, chief Market strategist at Toggle I A platform that provides A I derived insights from market data.

RJ.

It's good to have you on the show.

So, um in broad strokes, RJ, what I understand is you're, you're using A I to make investment recommendations and, and right now, based on that home builders, you say are looking pretty attractive.

Yes.

Uh you know, I think homebuilders in 2023 they had a strong year, 2024 has not been nearly as kind to them with the I TB ETF down uh under performing about 20% versus the broader market.

Uh but there are some bright spots, I think, you know, two key things which, which are screening.

Well, uh Chairman Powell has sort of indicated that the next fed action will be a cut even if we don't know when that might be.

Uh and the market is really pricing two cuts by the end of the year, as you noted mortgage rates while they're off highs.

Uh That's, that's been really sort of stymieing home builders.

Uh Another key piece for home builders are that lumber.

A key input is down about 20 to 30% since March.

So we're starting to see that, that tide turn this year where, where we might be able to really see an uptick in home builders.

RJ.

Talk to us a little bit more about the methodology here.

You're using A I to see trends to really help you ultimately pick some of those opportunities within the space.

I guess, more specifically, what are those key metrics that you're closely watching?

And when it comes to home builders, how much I it seems like that very much has been the story of the last couple of months.

So I guess what has changed is, is it just the fact that we're getting closer maybe now to that rate cut story.

Uh I think certainly getting close to the rate cut story is, is a big piece of it.

I think, you know, we connect often macroeconomic data and microeconomic data and, and, and stocks and um we analyze both structured and unstructured and, and what you're starting to see is that uh on the macro side, you, you've seen this sort of lock in of, of mortgages where people who have had very low rates on their mortgages being unwilling to move and you're starting to see even with the, the wage increases and wage pressures, um, hopefully, uh, the, the, the mortgage rates coming down sort of, uh, helps that problem of, of job mobility and people moving and, and help with the volume of housing that's turning over.

The other piece is that, uh, you're seeing in a lot of the transcripts earnings, a lot of these big names within, uh, within the home builders that have lending arms in addition to just building, they're really the sort of winners in this, in this high rate environment.

Um Yeah, exactly.

As you pulled up names like Dr Horton, um you know, $40 billion name because they, they can sort of win on both sides, right?

They're giving you the mortgage and they're, and they're making money on the construction itself.

It really, it really often helps with, uh uh with, with some of their margins and, and really helps uh sort of continue the business in a way that smaller names like bees are at the bottom.

Uh might be under a bit more pressure.

RJ.

You mentioned some big name, home builders.

You also have some big name backers for your firm.

I just want to ask you about, you got Stan Drunken Miller IC uh Thomas Petter.

How did you connect with those two and, and how they helped your business?

Yeah.

Um It's a, it's a great question.

We've, we've had tremendous support from interactive brokers.

Uh and from uh you know, ST Rock and Miller and, and the Duquesne family office, I think there's really demand across the street um to extract insights from data, right?

A lot of people have access to data, but the really hard thing is is processing it, making um making, being able to understand it.

Uh and, and really figuring out how do I save time, right.

And, and really a lot of those problems are, where should I spend my time, what parts of the market are interesting and where should I be investing or in investigating further?

And you know, that framework that we put together really resonated um with uh San himself as well as with the interactive brokers uh founder.

All right, RJ.

Very interesting, great insight there.

Thanks so much for joining us here in Yahoo Finance.

Have a great weekend.

Thank you.

You too.