Our Game Plan for This Housing Play

With oil prices moving higher Monday, renewed uncertainties about the duration of the Iran war and more hawkish than not comments from Fed Chair Kevin Warsh Friday, the Pro Portfolio’s position in Builders FirstSource (BLDR) is on our mind.

Let’s review and lay out our likely course of action subject to potential developments this week.

The Background

When we initiated a small position in BLDR on August 3, we called out that we would likely need to see the following for the shares to break out to the upside:

… a combination of a sustained decline in oil prices, expectations for Fed rate hikes to fall, a steady pickup in new mortgage originations, and a rebound in housing data.

We also noted that that developments on those fronts would help determine if the BLDR position would be a medium to longer-term one for the Portfolio.

The Last Few Weeks

As we sit here Monday, oil prices have increased and gas prices, so far, haven’t changed much compared to roughly a month a go. The prospect for the Fed’s next step with monetary policy, based on data in hand and Warsh’s Friday comments, is for a rate hike, not cuts.

The 30-year fixed mortgage rate is between 6.55%-6.62% compared to 6.66% in late July and early August. In its August 2026 Mortgage Finance Forecast, the Mortgage Bankers Association (MBA) revised its outlook, raising its 30-year fixed mortgage rate projections to 6.7% for the remainder of 2026 and all of 2027 compared to 6.5% with its July 2026 projection.

To that we can also add the recent MBA findings that mortgage applications for new home purchases decreased 5.7% from a year ago in July 2206. Compared to June 2026, applications decreased 1%. When we tally the weekly mortgage application data published so far for August, we find the following:

For the week ending August 7: The seasonally adjusted Purchase Index increased 3% week over week. The unadjusted Purchase Index increased 2 percent compared with the previous week and was 1 percent lower than the same week one year ago.

For the week ending August 14: The seasonally adjusted Purchase Index decreased 2% from one week earlier. The unadjusted Purchase Index decreased 3% compared with the previous week and was 3% lower than the same week one year ago.

For the week ending August 21: The seasonally adjusted Purchase Index decreased 0.3% week over week. The unadjusted Purchase Index decreased 2% compared with the previous week and was 5% lower than the same week one year ago. This report also found the purchase mortgage market continued to slow with applications now 5 percent behind last year’s pace.

With the growing likelihood inflation pressures will remain sticky, it’s hard to see a rebound in housing activity in near-term. This means BLDR shares could either be dead money or trade even lower.

Coming This Week

Let’s remember that we have the August PMI reports from S&P Global coming Tuesday and Thursday, and most likely headlines Tuesday associated with President Trump’s meeting with oil executives.

As discussed in our opening comments, we’re likely to see some bombastic headlines on that front, but the real impact on oil supply and prices won’t be felt until 2027 or later. Given how the market responds to Trump announcements, we could see oil trade off short-term, and that could give a bounce to BLDR shares.

Should the August PMI inflation data from ISM support the expectation for a September rate hike, that would give us another reason to sunset the Portfolio’s small position in BLDR. However, if that data give the Fed a reason to stand pat in September and point to softer August CPI and PPI prints compared to recent months, that would be a positive for BLDR.

Gaming it out, we should have some answers on what’s next for the Portfolio’s BLDR position in the coming days.

More Pro Portfolio:

At the time of publication, TheStreet Pro Portfolio was long BLDR shares.