'Homebuilder stocks move very quickly', Evercore ISI's Kim on why Tuesday's move higher is typical

Market Sentiment and Positioning - Home builder stocks are known for rapid movements, requiring investors to be early to avoid significantly higher prices [2][3] - The recent surge is attributed to sentiment and fundamentals slowing their decline, rather than actual fundamental improvement [3] - Specialists were tactically positioned negatively, but a slight improvement in the environment led to a realization of undervaluation and potential for dramatic revaluation [6] Valuation and Fundamentals - Home builders are structurally undervalued, historically trading on book value, which is no longer appropriate [4] - Companies have improved fundamentals by becoming more land light, increasing sustainable profitability, and reducing leverage [4][5] - NVR, a builder in the space, trades at a PE multiple of 18 or higher, while many others recently traded at high single-digit PE multiples [7] Policy Impact - Removing capital gains taxes on home sales would incrementally help the higher end of the market due to existing tax shields of $250,000 for singles and $500,000 for married couples [10] - A return of consumer confidence, particularly among lower-end consumers, would be the biggest catalyst for a rebound in housing demand [11][12][13] - The current administration's actions have created instability and uncertainty, potentially hurting the housing market more than helping it [11]