Mortgage rates yet again fell to a new record low on Aug 6 and inadvertently boosted the housing market that has been a bright spot for most part of the year in a rather unstable U.S. economy. After all, the labor market has slowed down and consumer sentiment has waned with coronavirus cases continuing to tick up.
To put things into perspective, the most-popular US 30-year fixed mortgage rate averaged 2.88% for the week ending Aug 6, down from 2.99% a week earlier and the lowest since Freddie Mac began tracking rates in 1971. It’s also the eighth time that the benchmark mortgage rate tumbled to a record low this year. In comparison, the 30-year fixed loan averaged 3.6% a year ago.
At the same time, the average rate on 15-year fixed-rate mortgage declined to 2.44% from 2.51% last week. Mortgage rate, by the way, have been weighed down by a couple of factors amid the pandemic. Firstly, the 10-year US Treasury yield, which the mortgage rate closely follows, is almost near an all-time low as investors pile up safe-haven assets and steer clear of risky ones. Secondly, the slide in borrowing costs comes as the Fed kept its benchmark rates at ultra-low levels to stimulate the economy.
As the coronavirus outbreak continues to aggravate across the United States and several states have paused or rolled back plans to reopen their economies, the Fed reassured Americans about its promise to support the economy. As a result, the Fed kept its benchmark short-term interest rate within a range of 0% to 0.25%. The Fed trimmed rates in mid-March as the pandemic made serious damage to the economy.
The Fed said “the path of the economy will depend significantly on the course of the virus.” The central bank added that “economic activity has picked up somewhat in recent months but remain well below their levels at the beginning of the year.”
5 Solid Buys
Given the aforesaid positives, investing in housing-related stocks that can make the most of the decline in mortgage rates this year seems judicious. After all, lower mortgage rates will certainly boost homebuying, which bodes well for housing-related stocks. Sam Khater, Freddie Mac’s chief economist, added that “we expect rates to stay low and continue to propel the housing market forward.” We have, thus, selected five such stocks that carry a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
PulteGroup, Inc. PHM primarily engages in the U.S. homebuilding business. The Zacks Consensus Estimate for its current-year earnings has risen 44.9% over the past 60 days. The company’s expected earnings growth rate for the current year is 22.1%.
Floor & Decor Holdings, Inc. FND operates as a multi-channel specialty retailer of hard surface flooring and related accessories. The Zacks Consensus Estimate for its current-year earnings has moved up 43.8% over the past 60 days. The company’s expected earnings growth rate for the current quarter is 40.8%.
TopBuild Corp. BLD engages in the installation and distribution of insulation and other building products to the U.S. construction industry. The Zacks Consensus Estimate for its current-year earnings has moved up 9.7% over the past 60 days. The company’s expected earnings growth rate for the next year is 24.1%.
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 Zacks Consensus Estimate for its current-year earnings has moved up 15.3% over the past 60 days. The company’s expected earnings growth rate for the current year is 22.8%.
Beazer Homes USA, Inc. BZH designs, builds and sells single family homes. The company designs homes to appeal primarily to entry-level and first move-up home buyers. The Zacks Consensus Estimate for its current-year earnings has moved up more than 100% over the past 60 days. The company’s expected earnings growth rate for the current year is 11%.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.3% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
PulteGroup, Inc. (PHM) : Free Stock Analysis Report
Beazer Homes USA, Inc. (BZH) : Free Stock Analysis Report
D.R. Horton, Inc. (DHI) : Free Stock Analysis Report
TopBuild Corp. (BLD) : Free Stock Analysis Report
Floor Decor Holdings, Inc. (FND) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research