The mortgage and housing markets have been severely punished in the last couple of years, there's no denying it. The home loan industry, of course, covers the entire nation while the real estate field's troubles have been rather uneven. Some areas, like Las Vegas, lots of Florida and California, have suffered much more than others. Optimistically, some indicators are now popping up all over that perhaps the very bottom is here for many regions, or at least within sight.
In any case, one financial expert is heavily leaning towards an impending recovery. Edward Lampert's ESL Investments, a hedge fund presently owning large stakes in Sears Holdings and AutoNation, has recently purchased small positions in struggling U.S. home builders Centex Corp. and KB Home. Total ESL investments currently amount to over $11 billion, so the little bit over $10 million slices of each of these two firms at today's prices isn't all that much. Yet, it's a move where he obviously sees value that could be easily increased should his vision come true.
In addition, ESL has also bought shares in the mortgage segment, notably in CIT Group, a subprime lender, and PHH Corp., an originator and servicing outfit. Again, as with the home builders, the approach is quite cautious, more like making sure that ESL has secured at least a minor position in the market from the very beginning of its recovery.
As a bolder step, the hedge fund recently hiked its holdings in Home Depot to around 22.7 million shares with a value of $590 million. Last year it owned 16.7 million of those shares. This clearly translates into a much stronger belief that a rebound in the housing market is imminent. It'll predictably be mismatched, since each region has its own inherent market strengths and weaknesses.