Homebuilding Market Bounces Back to New High: 5 Winners
The U.S. housing market has been on a tear over the past few months as a pandemic-triggered slowdown in home sales during the spring pushed home-buying season into summer, with homebuilder sentiment hitting a record high in September. Needless to say, the housing market in the United States is once again booming. Be it new or existing home sales or homebuilder sentiment or housing starts, the home market has finally started looking up.
This means both homebuilders and buyers have started showing confidence in the economy once again, signaling that the worst of the economic downturn is probably over. Also, home-buying activity is getting another boost from record-low mortgage rates.
Homebuilder Sentiment Hits Record High
Builder confidence in the market for single-family homes in September increased 5 points to 83 on the monthly NAHB/Wells Fargo Housing Market Index. This marks the highest reading in the survey’s 35-year history, which matched its last all-time high in August. Anything above 50 is considered positive. The index stood at 68 in September 2019.
All three of the index’s components rose to record highs. Current sales conditions rose 4 points to 88. Sales expectations for the next six months increased 6 points to 84. The traffic of prospective buyers increased 9 points to 73.
Supply Shortage & Other Factors Pushing Demand
Understandably, homebuilders are benefiting from severe shortage of existing homes for sale. There were already fewer homes to meet demand before the pandemic, and now fewer homeowners are willing to list their homes for sale.
Many other factors are also helping home sales as states continue to relax stay-at-home restrictions. Coronavirus resulted in record job losses in April, and a collapse in manufacturing output and retail sales. People backed out from buying homes as they feared blocking their money by investing in property. However, U.S. consumer confidence and consumer spending started improving since May, indicating that life is somewhat going back to normal.
Moreover, home-buying activity is getting another boost from record-low mortgage rates, which have dropped below 3% for a 30-year-fixed rate mortgage for the first time in nearly 50 years. Unless rates really break much higher, which is unlikely, the latest increase is unlikely to throw cold water on strong demand for housing. Thus, new home sales are likely to get a boost in the coming days also.
The rise in homebuilder sentiment coupled with a jump in new and existing homes sales are indications that buyers are showing interest with the U.S. economy gradually reopening and people going back to work. In this opportune time to invest in homebuilding, we suggest five stocks with a Zacks Rank #1 (Strong Buy) that are likely to gain ahead. You can see the complete list of today’s Zacks #1 Rank stocks here.
MI Homes, Inc. MHO is one of the nation's leading builders of single-family homes. M/I Homes serves a broad segment of the housing market, including first-time, move-up, luxury and empty-nester buyers.
The company’s expected earnings growth rate for the current year is 36.7%. The Zacks Consensus Estimate for current-year earnings has improved 91.2% over the past 30 days.
D.R. Horton, Inc. DHI is one of the leading national homebuilders, primarily engaged in the construction and sale of single-family houses both in the entry-level and move-up markets.
The company’s expected earnings growth rate for the current year is 35.7%. The Zacks Consensus Estimate for current-year earnings has improved 20.9% over the past 60 days.
PulteGroup, Inc. PHM engages in homebuilding and financial services businesses, primarily in the United States. The company conducts operations through two primary business segments – Homebuilding and Financial Services.
The company’s expected earnings growth rate for the current year is 22.1%. The Zacks Consensus Estimate for current-year earnings has improved 43.9% over the past 60 days.
M.D.C. Holdings, Inc. MDC engages in homebuilding and financial service businesses in the United States. It is engaged in the construction, sale and related financing of residential housing and the acquisition and development of land for use in the Denver, Phoenix, Maryland, Virginia, mid-Atlantic region, Las Vegas, Dallas and California metropolitan areas.
The company’s expected earnings growth rate for the current year is 28.2%. The Zacks Consensus Estimate for current-year earnings has improved 59.5% over the past 60 days.
Meritage Homes Corporation MTH primarily engages in building and selling single-family homes for entry-level, first-time, move-up, luxury and active adult buyers in historically high-growth regions of the United States.
The company’s expected earnings growth rate for the current year is 42.8%. The Zacks Consensus Estimate for current-year earnings has improved 50.6% over the past 60 days.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
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PulteGroup, Inc. (PHM): Free Stock Analysis Report
D.R. Horton, Inc. (DHI): Free Stock Analysis Report
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M.D.C. Holdings, Inc. (MDC): Free Stock Analysis Report
MI Homes, Inc. (MHO): Free Stock Analysis Report
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