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5 Stocks to Buy on a Solid Rise in Homebuilder Confidence
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Construction activity in the United States has been rising since the economy started reopening. However, the biggest support the sector has been getting is from the homebuilding market. Sales of new and existing homes have been increasing almost every month.
Homebuilder confidence has been on the rise in recent times and people are buying homes despite increasing costs. Given this scenario, housing stocks like Beazer Homes USA, Inc. (BZH - Free Report) , TRI Pointe Group, Inc. (TPH - Free Report) , Meritage Homes Corporation (MTH - Free Report) , Toll Brothers (TOL - Free Report) and Lennar Corporation (LEN - Free Report) are expected to benefit in the near term.
Homebuilder Confidence on a High
December isn’t a great month for the housing market but demand for new homes is giving a boost to homebuilder confidence. The National Association of Home Builders reported on Dec 15 that the U.S. index for homebuilder confidence came up with a reading of 84 for December, inching up one point from November.
Although the rise is moderate, homebuilder confidence has reached its highest level since February and the housing market is closing the year on a high. Moreover, this is the fourth consecutive month that homebuilder sentiment has climbed. Anything above 50 is considered positive.
The rise in sentiment comes despite inflation worries, labor shortages and supply-chain crisis. Prices of construction goods like steel, aluminum and wallboard all rose in November, but that hasn’t affected demand for new homes. In fact, U.S. new home prices jumped 17.5% year over year in November.
Housing Market Poised to Grow
Homebuilder confidence got a boost in December from a number of factors. All the three components of HMI’s came up with impressive readings. Current sales conditions increased to 90. Buyer traffic jumped to 70, while sales expectations for the next six months remained unchanged for the third straight month at 84.
The homebuilding industry has been on a tear since the COVID-19 outbreak. After coming to almost a halt during the initial months of the outbreak, people have been flocking to buy new homes. Last year, a low mortgage rate helped to boost sales.
However, this year too hasn’t impacted sales much despite higher interest rates, surging price of raw materials and labor shortage. The Commerce Department said that sales of new homes rose 0.4% in October to an annual rate of 745,000 after jumping a solid 7.1% the previous month.
Also, existing home sales grew 0.8% in October to a seasonally adjusted annual rate of 6.34 million units after an impressive 7% jump in September. This has been boosting homebuilder confidence and the trend is likely to continue in the coming months given the existing demand.
Our Choices
A jump in homebuilder confidence for the fourth consecutive month shows that the homebuilding market is on track for growth in the coming months. In this opportune time to invest in homebuilding, we suggest four stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) that are likely to gain ahead. You can see the complete list of today’s Zacks #1 Rank stocks here.
Beazer Homes USA, Inc. designs, builds and sells single-family homes. The company designs homes to appeal primarily to entry-level and first move-up home buyers. BZH designs homes to appeal primarily to entry-level and first move-up home buyers. Beazer Homes’ objective is to provide customers with homes that incorporate quality and value. BZH’s subsidiary, Beazer Mortgage, originates the mortgages for the company's home buyers.
Beazer Homes’ expected earnings growth rate for the current year is 23.7%. The Zacks Consensus Estimate for current-year earnings has improved 44% over the past 60 days. Shares of BZH have gained 23.6% in the past three months. Beazer Homes has a Zacks Rank #1.
Toll Brothers Inc. builds single-family detached and attached home communities; master-planned luxury residential resort-style golf communities; and urban low, mid, and high-rise communities, principally on the land it develops and improves. TOL operates in Arizona, California, Florida, Delaware, Maryland, Pennsylvania, and South Carolina. Toll Brothers offers homes under two segments, namely Traditional Home Building Product and City Living.
Toll Brothers’expected earnings growth rate for the current year is 46.3%. The Zacks Consensus Estimate for current-year earnings improved 11.6% over the past 60 days. Shares of TOL have gained 15.4% in the past three months. Toll Brothers has a Zacks Rank #1.
TRI Pointe Group, Inc. is involved in the design, construction and sale of single-family homes. TPH’s operating portfolio includes Maracay Homes in Arizona; Pardee Homes in California and Nevada; Quadrant Homes in Washington; Trendmaker Homes in Texas; TRI Pointe Homes in California and Colorado; and Winchester Homes in Maryland and Virginia.
TRI Pointe Group’s expected earnings growth rate for the current year is 80.2%. The Zacks Consensus Estimate for current-year earnings has improved 8.6% over the past 60 days. Shares of TPH have gained 22.5% in the past three months. TRI Pointe Group sports a Zacks Rank #1.
Meritage Homes Corporation is one of the leading designers and builders of single-family homes. MTH primarily engages in building and selling single-family homes for entry-level, first-time, move-up, luxury and active-adult buyers in the historically high-growth regions of the United States. Meritage Homes operates as a holding company and has no independent assets or operations.
Meritage Homes Corporation’s expected earnings growth rate for the current year is 74.4%. The Zacks Consensus Estimate for current-year earnings has improved 2.9% over the past 30 days. Shares of MTH have advanced 13.6% in the past three months. Meritage Homes Corporation has a Zacks Rank #1.
Lennar Corporation is engaged in homebuilding and financial services in the United States. LEN’s reportable segments consist of Homebuilding, Lennar Financial Services, Rialto and Lennar Multifamily. Despite the varied product portfolio, homebuilding remains Lennar’s core business.
The company’s expected earnings growth rate for the current year is 5.1%. The Zacks Consensus Estimate for current-year earnings has improved 1.6% over the past 60 days. Shares of LEN have have gained 11.8% in the past three months. Lennar carries a Zacks Rank #2.
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5 Stocks to Buy on a Solid Rise in Homebuilder Confidence
Construction activity in the United States has been rising since the economy started reopening. However, the biggest support the sector has been getting is from the homebuilding market. Sales of new and existing homes have been increasing almost every month.
Homebuilder confidence has been on the rise in recent times and people are buying homes despite increasing costs. Given this scenario, housing stocks like Beazer Homes USA, Inc. (BZH - Free Report) , TRI Pointe Group, Inc. (TPH - Free Report) , Meritage Homes Corporation (MTH - Free Report) , Toll Brothers (TOL - Free Report) and Lennar Corporation (LEN - Free Report) are expected to benefit in the near term.
Homebuilder Confidence on a High
December isn’t a great month for the housing market but demand for new homes is giving a boost to homebuilder confidence. The National Association of Home Builders reported on Dec 15 that the U.S. index for homebuilder confidence came up with a reading of 84 for December, inching up one point from November.
Although the rise is moderate, homebuilder confidence has reached its highest level since February and the housing market is closing the year on a high. Moreover, this is the fourth consecutive month that homebuilder sentiment has climbed. Anything above 50 is considered positive.
The rise in sentiment comes despite inflation worries, labor shortages and supply-chain crisis. Prices of construction goods like steel, aluminum and wallboard all rose in November, but that hasn’t affected demand for new homes. In fact, U.S. new home prices jumped 17.5% year over year in November.
Housing Market Poised to Grow
Homebuilder confidence got a boost in December from a number of factors. All the three components of HMI’s came up with impressive readings. Current sales conditions increased to 90. Buyer traffic jumped to 70, while sales expectations for the next six months remained unchanged for the third straight month at 84.
The homebuilding industry has been on a tear since the COVID-19 outbreak. After coming to almost a halt during the initial months of the outbreak, people have been flocking to buy new homes. Last year, a low mortgage rate helped to boost sales.
However, this year too hasn’t impacted sales much despite higher interest rates, surging price of raw materials and labor shortage. The Commerce Department said that sales of new homes rose 0.4% in October to an annual rate of 745,000 after jumping a solid 7.1% the previous month.
Also, existing home sales grew 0.8% in October to a seasonally adjusted annual rate of 6.34 million units after an impressive 7% jump in September. This has been boosting homebuilder confidence and the trend is likely to continue in the coming months given the existing demand.
Our Choices
A jump in homebuilder confidence for the fourth consecutive month shows that the homebuilding market is on track for growth in the coming months. In this opportune time to invest in homebuilding, we suggest four stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) that are likely to gain ahead. You can see the complete list of today’s Zacks #1 Rank stocks here.
Beazer Homes USA, Inc. designs, builds and sells single-family homes. The company designs homes to appeal primarily to entry-level and first move-up home buyers. BZH designs homes to appeal primarily to entry-level and first move-up home buyers. Beazer Homes’ objective is to provide customers with homes that incorporate quality and value. BZH’s subsidiary, Beazer Mortgage, originates the mortgages for the company's home buyers.
Beazer Homes’ expected earnings growth rate for the current year is 23.7%. The Zacks Consensus Estimate for current-year earnings has improved 44% over the past 60 days. Shares of BZH have gained 23.6% in the past three months. Beazer Homes has a Zacks Rank #1.
Toll Brothers Inc. builds single-family detached and attached home communities; master-planned luxury residential resort-style golf communities; and urban low, mid, and high-rise communities, principally on the land it develops and improves. TOL operates in Arizona, California, Florida, Delaware, Maryland, Pennsylvania, and South Carolina. Toll Brothers offers homes under two segments, namely Traditional Home Building Product and City Living.
Toll Brothers’expected earnings growth rate for the current year is 46.3%. The Zacks Consensus Estimate for current-year earnings improved 11.6% over the past 60 days. Shares of TOL have gained 15.4% in the past three months. Toll Brothers has a Zacks Rank #1.
TRI Pointe Group, Inc. is involved in the design, construction and sale of single-family homes. TPH’s operating portfolio includes Maracay Homes in Arizona; Pardee Homes in California and Nevada; Quadrant Homes in Washington; Trendmaker Homes in Texas; TRI Pointe Homes in California and Colorado; and Winchester Homes in Maryland and Virginia.
TRI Pointe Group’s expected earnings growth rate for the current year is 80.2%. The Zacks Consensus Estimate for current-year earnings has improved 8.6% over the past 60 days. Shares of TPH have gained 22.5% in the past three months. TRI Pointe Group sports a Zacks Rank #1.
Meritage Homes Corporation is one of the leading designers and builders of single-family homes. MTH primarily engages in building and selling single-family homes for entry-level, first-time, move-up, luxury and active-adult buyers in the historically high-growth regions of the United States. Meritage Homes operates as a holding company and has no independent assets or operations.
Meritage Homes Corporation’s expected earnings growth rate for the current year is 74.4%. The Zacks Consensus Estimate for current-year earnings has improved 2.9% over the past 30 days. Shares of MTH have advanced 13.6% in the past three months. Meritage Homes Corporation has a Zacks Rank #1.
Lennar Corporation is engaged in homebuilding and financial services in the United States. LEN’s reportable segments consist of Homebuilding, Lennar Financial Services, Rialto and Lennar Multifamily. Despite the varied product portfolio, homebuilding remains Lennar’s core business.
The company’s expected earnings growth rate for the current year is 5.1%. The Zacks Consensus Estimate for current-year earnings has improved 1.6% over the past 60 days. Shares of LEN have have gained 11.8% in the past three months. Lennar carries a Zacks Rank #2.