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5 Top-Ranked Stocks to Tap the Boom in Housing Market

Ritujay Ghosh
·5 min read

The U.S. housing market has reached unprecedented heights despite the economy taking a bad hit due to the coronavirus pandemic. In fact, the housing market has been swimming against the tide. Ever since the economy reopened, people have been flocking to the markets to buy homes.

Be it new or existing home sales or homebuilder sentiment or housing starts, the home market has put up a great show over the past few months. At the same time, it also means that both homebuilders and buyers have started showing confidence in the economy once again, signaling that the worst of the economic downturn is probably over.

Home Prices Hit Record High

On Nov 25, the Commerce Department said that sales of new homes jumped 41.5% on a year-over-year basis in October. Although October saw a slight dip of 0.3% in overall new home sales compared to a seasonally adjusted annual rate of 999,000 units last month, the housing market is on a solid track.

A low mortgage rate is giving a boost to home prices across the country. According to a report from the Federal Housing Finance Agency released on Nov 24, U.S. home prices jumped a record 3.1% in the third quarter from the prior quarter. This is a 7.8% rise from the year-ago levels.

According to the National Association of Realtors, the median home price in the United States is now $318,000, marking a 16% year-over-year increase. Understandably, low mortgage rates and growing demand for homes is acting as a tailwind for the housing market.

Supply Shortage & Other Factors Pushing Demand

Homebuilder sentiment for single-family homes hit a record high for the third consecutive month in November. According to the National Association of Home Builders’ Wells Fargo Housing Market Index, homebuilder confidence hit a record 90 in November. The index read 71 in the year-earlier period. This is a significant improvement given that builder sentiment had hit a low of 30 in April, just after the coronavirus outbreak.

However, builders have been complaining of a shortage of material and land. There were already fewer homes to meet demand before the pandemic, and now fewer homeowners are willing to list their homes for sale. This is further helping home prices and the trend is likely to continue in the days to come.

Our Choices

Record low mortgage rate is helping boost home prices, which is giving homebuilder sentiment a boost. Moreover, a jump in new and existing home sales is an indication that buyers are showing confidence in the economy. 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.

NVR, Inc. NVR is engaged in the construction and sale of single-family detached homes, townhomes and condominium buildings, all of which are primarily constructed on a pre-sold basis.

The company’s expected earnings growth rate for the current year is 3.7%. The Zacks Consensus Estimate for current-year earnings has improved 4.7% over the past 60 days.

TRI Pointe Group, Inc. TPH is involved in the design, construction and sale of single-family homes. The company'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.

The company’s expected earnings growth rate for the current year is 27.9%. The Zacks Consensus Estimate for current-year earnings has improved 22.1% 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 41.3%. The Zacks Consensus Estimate for current-year earnings has improved 15.5% over the past 60 days. 

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 company’s expected earnings growth rate for the current year is 2.1%. The Zacks Consensus Estimate for current-year earnings has improved 55% over the past 60 days.

Century Communities, Inc. CCS is a home building and construction company. Its activities comprise land acquisition, development, and entitlements; and the acquisition, development, construction, marketing, and sale of various single-family detached and attached residential home projects. 

The company’s expected earnings growth rate for the current year is 25.9%. The Zacks Consensus Estimate for current-year earnings has improved 17.5% over the past 60 days.

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PulteGroup, Inc. (PHM) : Free Stock Analysis Report
 
NVR, Inc. (NVR) : Free Stock Analysis Report
 
TRI Pointe Group, Inc. (TPH) : Free Stock Analysis Report
 
Beazer Homes USA, Inc. (BZH) : Free Stock Analysis Report
 
Century Communities, Inc. (CCS) : Free Stock Analysis Report
 
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