Housing Bonds A Recipe for Investment Success

Affordable Housing: A Boiling Point

Right let's get one thing straight. Housing affordability is a bloody nightmare isn't it? It's not just about the cost of a house; it's about the whole bloody system. People are struggling and that's not just a statistic; it's real lives. Nuveen bless their cotton socks suggests housing municipal bonds as a possible solution. I mean it's not a miracle cure but it's a start. The income from these bonds is exempt from federal tax and if you're lucky state tax too. That's a bit of a bonus isn't it? Like finding a perfectly ripe avocado when you least expect it. Investors can potentially pick up some extra yield which is always welcome.

The K Shaped Recovery: A Load of Bollocks

This whole K shaped recovery thing? Don't get me started. High income households are doing just fine thank you very much while everyone else is eating scraps. Mortgage rates are through the roof. It's a complete shambles. But as builders start to address the affordability problem (finally) more housing bonds are coming to market. Now I'm no financial advisor but even I can see that means more opportunities. Speaking of uncertain landscapes have you read Trump's Tariff Tango Yields Uncertainty? It appears that just like politics the housing market is also in constant flux.

Yields: A Rare Opportunity

Dan Close the chief investment officer at Nuveen reckons that the increase in housing bonds means they can pick up about 60 extra basis points in the 10 year part of the curve compared to other municipal bonds. That's not exactly chump change is it? Currently housing bonds with 10 year maturities have an average yield of 3.58% while the broader muni market sits at 3.06%. It's like finding a truffle in a pile of mushrooms; you've got to know where to look. The tax exempt status of these municipals allows governmental agencies and private developers to access cheaper capital and those savings get passed on to renters and homebuyers.

A Barbell Approach: Not Just for the Gym

Close likes a barbell approach mixing single family and workforce munis. Single family bonds are issued by state agencies to help first time homeowners and are typically highly rated. "We're seeing a good deal of issuance which has cheapened up that market," Close said. "You can pick up spread versus the [general obligation bond from the] the issuing state." It's a bit like having your cake and eating it. The Nuveen All American Municipal Bond Fund holds single family housing bonds including those from the North Carolina Housing Finance Agency.

Workforce Housing: High Risk High Reward

Now workforce housing bonds are a different beast. They target essential workers like teachers and nurses who earn too much for affordable housing but can't afford market rates. These bonds are high yield which means they come with more risk. "These tend to be the lowest credit quality bonds that we see," Close said. "These are individual projects and those are where we think you could pick up the most additional yield right now." It's a bit like cooking with fire; you might get burned but the results can be spectacular.

Doing Good While Doing Well

So there you have it. Investing in housing bonds might not be the sexiest thing you can do but it could be a damn good idea. You get some income and you're helping to address the housing crisis. It's a win win. Just remember do your homework don't be a donkey and don't serve any raw chicken. And who knows maybe one day everyone will be able to afford a decent bloody home. Now get out there and make it happen.