Steve Eisman, the investor who called and profited from the subprime mortgage crisis, said Tuesday that he would advise against buying homebuilders and consumer-related stocks given higher interest rates. “I wouldn’t own homebuilders right now,” Eisman said on CNBC’s ” Fast Money .” “The homebuilders have been subsidizing their customers with lower rates, but even that’s gonna bite. I wouldn’t be involved with building products to any significant degree on the residential side.” The senior portfolio manager at Neuberger Berman says that the surge in interest rates makes it more expensive for consumers to finance big-ticket items, including cars. The Federal Reserve has taken the fed funds rate in a targeted range of 5.25% to 5.5%, the highest in some 22 years. The average rate on the popular 30-year fixed mortgage recently rose to 7.72%. “I don’t think you should buy somebody who finances new cars or used cars, et cetera. Anything in that universe, I think, is just going to have trouble. Just because of simple math,” Eisman said. Eisman shot to fame by betting against subprime mortgage loans before the 2008 financial crisis, as chronicled in Michael Lewis’ “The Big Short: Inside the Doomsday Machine,” and the subsequent Oscar-winning movie based on the book. The widely followed investor said he did the calculation on the housing market to gauge the impact from surging rates — to pay the same monthly payment on a house as someone with a 3% mortgage rate, the price would have to be down 50% with mortgage rate at 8%. “No one’s going to sell their house down at all if they have a job. They just won’t move. So the housing market is locked,” Eisman said. “People can’t buy and they can’t sell.” The investor also reiterated that the banking sector is uninvestable due to risks from crimped margins and tougher regulations. Big banks are set to release quarterly earnings starting Friday.
