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Existing Home Sales Jump in October: 4 Stocks to Buy

Ritujay Ghosh
·5 min read

The housing market has been witnessing steady growth over the past few months, with more Americans buying homes since the lockdown was lifted. Existing home sales jumped for the fifth straight month, according to the National Association of Realtors (NAR).

The coronavirus pandemic has battered almost all industries, with millions losing jobs and finance becoming a major problem. The lockdown period saw fewer Americans buying homes. However, things started changing fast in favor of the homebuilding market as the economy reopened, with more people flocking to buy home during summer. And the positive trend has been continuing since then.

Existing Home Sales Rise in October

Existing homes sales rose 4.3% in October from the prior month and 26.6% from the year-ago period to a seasonally adjusted annual rate of 6.85 million units, the NARsaid on Nov 19. Existing home sales have risen for the fifth consecutive month now and the annualized rate is the highest since February 2006. 

The median existing home price was around 16% more than the prior-year period and stood at $313,000. The jump in month-over-month sales was witnessed in all four major regions, with the Midwest coming up with the best performance. According to NAR’s chief economist, Lawrence Yun, the housing industry has shown impressive growth, despite coronavirus-induced shutdowns hindering all markets.

Homebuilder Confidence on a High, Low Mortgage Rates Boosting Demand

Homebuilder confidence has been on a high over the past few months given the rise in demand. Homebuilder confidence 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 November 2019. This is a significant improvement given that builder sentiment had hit a low of 30 in April, just after the coronavirus outbreak.

Understandably, more people have been buying homes after that, which has made builders confident again. Several other factors are also helping in giving a boost to home sales since stay-at-home restrictions getting lifted in May. Also, the homebuilding market is getting a boost from record-low mortgage rates, which have dropped below 3% for a 30-year-fixed rate mortgage for the first time in almost 50 years.

Our Choices

The jump in existing homes sales coupled with a rise in homebuilder sentiment are indications that buyers are showing faith in the economy and are looking for homes. 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.

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 52% over the past 60 days.

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 23.7%. The Zacks Consensus Estimate for current-year earnings has improved 4.7% 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. 

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 27.2%. The Zacks Consensus Estimate for current-year earnings has improved 21.4% 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
 
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