Shares of some top homebuilding companies jumped during
trading session on Thursday, Jun 13, as the U.S. new home sales
continued its upward swing and reflected potential for further
improvement. Subsequently, the broader housing market enjoyed a
strong rally and the SPDR S&P Homebuilders (XHB) jumped
Overall, the U.S. housing market has seen significant upside
in new home construction activity since mid-2012. U.S. home sales
are rising as low interest rates and increased rentals have
improved the affordability of homes. However, supply remains
limited by low home inventories, both for new and existing homes.
On top of that, strong market demand has been further pushing the
The National Association of Home Builders/Wells Fargo Housing
Market Index (HMI), known as the homebuilder sentiment index,
improved by 3 points to 44 in May after witnessing a slight
decline in April. The improvement in May reflects better new home
sales and expectations for the future.
Here are a few stocks that witnessed a significant rebound on
D.R. Horton, Inc.
), carrying a Zacks Rank #1 (Strong Buy), rose 5.2% to $23.66 on
Thursday. This homebuilder has been seeing significant
improvement in profitability on the back of geographic diversity,
solid cost discipline, sound balance sheet, improved liquidity
position, better pricing power as well as rising home inventories
and land position.
) rose 4.65% to $20.94 on Thursday. This Zacks Rank #2 (Buy)
stock is gaining largely from its significant land positions,
broad geographic and product diversity, solid operating leverage,
and better capital position.
) rose 4.06% to $33.04 on Thursday. The company's focus on
raising the quality and the luxury quotient of its homes gives it
a competitive advantage. The stock currently carries Zacks Rank
), which carries a Zacks Rank #3 (Hold), rose 5.47% to $38.73 on
Thursday. We believe that the company is performing better than
its peers by increasing selling prices, improving volumes, making
opportunistic land acquisitions and consistently delivering
decent profit margins. In addition to its homebuilding
operations, Lennar's multiple platforms including Rialto,
Mutlifamily and Financial Services, are also driving the
Smaller homebuilders like
The Ryland Group, Inc.
), carrying Zacks Rank #1 (Strong Buy);
Meritage Homes Corporation
), carrying Zacks Rank #1 (Strong Buy), and
MDC Holdings Inc.
), carrying Zacks Rank #2 (Buy), also rose during Thursday's
trading session. While RYL rose 7.16% to $42.95, MTH rose 6.05%
to $46.80 and MDC went up 5.59% to $35.72.
Though overall new home sales are expected to continue rising
in future months, rising input costs are a concern. Building
material and labor costs are expected to inflate. As housing
starts accelerate, both labor and construction material costs
would continue to experience upward pricing pressure, curbing
profitability of homebuilders. Moreover, difficulty in obtaining
construction loans and tightened lending standards are making it
tough for homebuilders, especially the smaller ones, to
effectively respond to increasing demand.
Despite these headwinds, recovery of the housing market is one
of the bright spots on the path to overall economic recovery.
Only time will tell if the industry can sustain the growth
D R HORTON INC (DHI): Free Stock Analysis
LENNAR CORP -A (LEN): Free Stock Analysis
MDC HLDGS (MDC): Free Stock Analysis Report
MERITAGE HOMES (MTH): Free Stock Analysis
PULTE GROUP ONC (PHM): Free Stock Analysis
RYLAND GRP INC (RYL): Free Stock Analysis
TOLL BROTHERS (TOL): Free Stock Analysis
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