Tariff shock: Where smart money is going in mortgage, housing

A series of far-reaching policy moves have introduced challenging volatility into the market, raising the question of what the best home-finance investments in this environment are.

Experts who have been considered some of the smartest people in the room have some thoughts on what to do given the market turmoil that has followed recent tariff announcements.

What follows are some mortgage-related picks and predictions from investors, analysts and prognosticators who have been right a high percentage of the time in the past, or have been able to reap significant net windfalls from their market bets.

In line with common disclaimers, remember that past performance does not guarantee future results. This is not professional investment advice. Also, note some of these experts do acknowledge some risks and interests in their predictions, and may disagree with each other.

Bill Gross

Gross, who is known as the Bond King, said in an X post earlier this month a couple "conservative" single-family mortgage picks he likes in an uncertain market are real-estate investment trusts like AGNC Investment Corp. and Two Harbors.

Mortgage REITs tend to do well when rates fall. President Trump and Treasury Secretary Scott Bessent have noted that they're both aiming for reduced long-term financing costs. However, the independent Federal Reserve has said this won't influence short-term rate policy.

Government-related mortgage-backed securities dominate these mortgage REIT portfolios. Those investments are exposed to uncertainty due to potential government-sponsored enterprise reform. But Bessent has specifically shown interest in protecting the mortgage rates linked to the GSEs, and the strength of their securities is a big part of that equation.

Warren Buffett

Cash is an obvious strategy when markets are rough, but famous investor Warren Buffett's sales of housing investments to raise cash have had some nuances.

Buffett, who Bloomberg recently reported did well as an investor during this week's tariff-driven stock market rout, was selectively selling some, but not all, of his equity investments in the homebuilder sector before the results of the election were in last year.

Speculation that Buffett was becoming more pessimistic about housing after reportedly sold a stake in a builder not long after he bought it in recent years. Builder stocks did tank due to the tariffs, which Buffett has indicated can be disruptive, but his sales have been selective.

As of fourth-quarter 2024, Buffett's Berkshire Hathaway still held stakes in two builders, Lennar Corp. and NVR Inc, according to a U.S. News & World Report analysis of the company's Securities and Exchange Commission filings. 

Warren Buffett also owns Clayton Homes as part of Berkshire Hathaway. He has long shown interest in the potential for cheaper manufactured and modular forms of housing production in a pricey market, but these risk particular exposure to the global supply chain amid tariffs given the materials used.

(There are unfounded rumors that Trump ally and billionaire Elon Musk has a business interest in cost-effective structures, too, but it's all reportedly tied back only to a modular unit he purchased as a guest house, according to Check Your Fact and similar sites like Snopes.)

Jay McCanless

Wedbush's Jay McCanless has been called one of Wall Street's most accurate analysts with an 87% success rate. He had some thoughts on "names to consider" in building products and proptech after the stock market's pullback on the heels of the tariff announcement last week.

In the first category, McCanless put outperform ratings on Builders FirstSource and Universal Forrest Products. In the second category, he put an outperform rating on Zillow.

He also said Wedbush "remains bullish" on luxury builders like Toll Brothers, Taylor Morrison, and PulteGroup. He has similar outperform ratings on Beazer, Landsea and M/I Homes. He had a neutral rating on Lennar and several other builders.

McCanless highlights a few "silver linings" to the tariffs behind his picks:

• Canadian lumber has an exemption from new tariffs and won't be subject to more than the current 14.5% duty, 
• The National Association of Home Builders has indicated that gypsum, appliances and concrete also have tariff exemptions; and
• NAHB estimated that international costs represent 7.2% of the average $174,000 spent to build a home last year.

Barry Habib

A key question raised by the recent stock market turmoil is what impact it might have on home prices. Highway.AI CEO Barry Habib, who recently received his fourth Crystal Ball award for his accuracy predicting them over the last two years, has some ideas.

Habib and his team recently addressed the issue of what increasing forecasts for a recession in the wake of tariff announcement could mean for housing values. 

They said historically the odds are that home prices will bear up during a recession, when a weak economy can lead to lower rates, which can potentially lead to increased ability to qualify for loans.

"During recessions, the bad thing is people lose jobs but when interest rates decline, more people become eligible," he said in a recent online broadcast.

In each of the last seven recessions, except for one, home prices remained high, according to Diana Bajiramovic, vice president, market insights at Highway.AI, who analyzed housing value performance between 1975 and the present day.

The one historical exception that represents a risk factor was the Great Financial Crisis' housing crash, which Habib noted was fueled by "crazy underwriting guidelines" that largely disappeared in a wave of reform following the GFC.