Skip to Content
Morningstar
Get 14 Days Free
Quarter-End Insights

Financial Services: Housing Market Still on the Worry List

Bargains are still hard to find in financial services, as the U.S. mortgage market is stuck in limbo and housing bubble concerns rise in Canada.

Stephen Ellis
Mentioned: , , , , , , , , ,
  • The financial services sector appears to be fairly valued. The overall industry trades at a price to fair value ratio of 1.02, which suggests bargains are limited. The cheapest subsector is Latin American banks at a price to fair value ratio of 0.88, while the most overvalued subsectors are regional U.S. banks, saving and cooperative banks, and Asian banks, with price to fair value ratios of 1.09.
  • The U.S. mortgage market continues to be in limbo. With Fannie Mae and Freddie Mac in the process of being wound down, better positioned banks will need to focus on developing long-term advantages in the market through economies of scale, low funding costs, underwriting quality, revenue generation ability, and operating efficiency. Regional banks with significant mortgage exposure are most susceptible to market share losses as they lack the scale or cost advantages needed to maintain share in a more heavily regulated market.
  • The Canadian housing bubble is another source of concern. While we have numerous concerns, we highlight three of the major areas: housing affordability, the impact of immigration, and the Canadian government's ability to create a soft landing for the Canadian housing market.

 

Stephen Ellis does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.