After a coronavirus-marred April-June quarter, the U.S. economy made a solid comeback in the third quarter. However, the relentless rise in coronavirus infection cases and government-imposed restrictions in some places and activities are threatening broader economic recovery.
But the same cannot be said about the U.S. housing market. This is because Americans have been buying new houses of late despite many being on jobless benefits. In fact, homebuilding activity picked up significantly last month.
Privately-owned housing starts jumped 4.9% to a seasonally-adjusted annual rate of 1,530,000 in October, followed by an upwardly revised estimate of 1,459,000 in the prior month, per the Commerce Department, as quoted in a nasdaq.com article, contributor being RTTNews.com.
New residential construction project numbers in the United States easily surpassed expectations. Analysts had expected housing starts to climb 3.2% to a seasonally-adjusted annual rate of 1,415,000 in the month of October.
Single-family starts, which constitute the major portion of the U.S. housing market, jumped 6.4% to a seasonally-adjusted annual rate of 1,179,000 in October. It’s well above September’s revised figure of 1,108,000. At the same time, multi-family starts came in at 334,000 last month, added the Commerce Department.
Homebuilding activity, in fact, has picked up in the sparsely populated areas of the Northeast, South and the mountain regions of the West. This is because Americans are now avoiding major cities where the coronavirus infection is increasing by leaps and bounds and are instead shifting their accommodation toward less populated areas.
Without a doubt, Americans can still afford new homes due to record low mortgage rates. They are even willing to take loans to buy houses. Needless to say, the Mortgage Bankers Association recently confirmed that applications for home loans have increased substantially.
And maybe that’s the reason why builders are optimistic about initiating construction of new housing projects. To put things into perspective, building permits for privately-owned housing units came in at a healthy 1,545,000 last month, almost unchanged from the revised rate in September and the highest since March 2007, according to the Commerce Department, as mentioned in a Reuters article.
What’s more encouraging, homebuilder confidence actually touched a record high this month, with builder sentiment hitting the 90 mark on the National Association of Home Builders’ Wells Fargo Housing Market Index, as quoted in a CNBC article. Anything above 50 indicates positive sentiment and it’s also worth mentioning that when the pandemic ravaged the economy in the month of April, builder sentiment had plummeted to 30. Thus, it can be safely concluded that home buyers’ demand has been encouraging since then, and the future of homebuilders remains bright.
Top 5 Gainers
With U.S. housing market experiencing a full-fledged boom and homebuilding increasing at a pace closer to the pre-pandemic period last month, homebuilder stocks are undoubtedly big gainers. Moreover, homebuilders are currently pretty confident about the future of their business as demand for homes increases amid low interest rates. We have, thus, selected five such stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Beazer Homes USA, Inc. BZH designs, builds and sells single family homes. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has climbed almost 52% over the past 60 days. The company’s expected earnings growth rate for the current and next year is 2.1% and 24.9%, respectively.
Lennar Corporation LEN is engaged in homebuilding services in the United States. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has risen 12.3% over the past 90 days. The company’s expected earnings growth rate for the current and next year is 25.4% and 4.2%, respectively.
PulteGroup, Inc. PHM engages in homebuilding services, offering a wide variety of home designs including single family detached, townhouses, condominiums and duplexes at different prices. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has climbed 15.5% over the past 60 days. The company’s expected earnings growth rate for the current and next year is 41.3% and nearly 11%, respectively. 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. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved up 4.7% over the past 60 days. The company’s expected earnings growth rate for the current and next year is 3.7% and 38.9%, respectively.
Toll Brothers Inc. TOL builds single-family detached and attached home. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has risen 0.3% over the past 60 days. The company’s expected earnings growth rate for the next year is 56.3%.
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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