U.S. markets closed
  • S&P 500

    3,638.35
    +8.70 (+0.24%)
     
  • Dow 30

    29,910.37
    +37.87 (+0.13%)
     
  • Nasdaq

    12,205.85
    +350.85 (+2.96%)
     
  • Russell 2000

    1,855.27
    +10.25 (+0.56%)
     
  • Crude Oil

    45.52
    -0.19 (-0.42%)
     
  • Gold

    1,783.10
    -22.40 (-1.24%)
     
  • Silver

    22.77
    -0.67 (-2.86%)
     
  • EUR/USD

    1.1960
    +0.0047 (+0.39%)
     
  • 10-Yr Bond

    0.8420
    -0.0360 (-4.10%)
     
  • GBP/USD

    1.3333
    -0.0024 (-0.18%)
     
  • USD/JPY

    104.0850
    -0.1650 (-0.16%)
     
  • BTC-USD

    18,099.56
    +331.50 (+1.87%)
     
  • CMC Crypto 200

    333.27
    -37.24 (-10.05%)
     
  • FTSE 100

    6,367.58
    +4.65 (+0.07%)
     
  • Nikkei 225

    26,644.71
    +107.41 (+0.40%)
     

New Home Sales Near 14-Year High in August: 5 Solid Picks

Ritujay Ghosh
·6 min read

Sales of new single family homes in the United States neared a 14-year high in August as the housing market outperformed the broader economy amid low mortgage rates and migration from densely populated urban centers to less-populated areas on fears of coronavirus.

The new data comes just days after the United States witnessed an uptick in homebuilder sentiment in September. This 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.

New Home Sales Hit Record High

The Commerce Department said on Sep 24 that new home sales rose 4.8% to a seasonally adjusted annual rate of 1.011 million units last month, the highest level since September 2006. July’s sales pace was revised upward to 965,000 units from the previously reported 901,000 units.

The August rate is 43.2% higher than the August 2019 pace. Regionally, on a year-to-date basis, new home sales were up in all four regions: 23.6% in the Northeast, 23.6% in the Midwest, 13.9% in the South, and 12.4% in the West.

The four straight months of gain follows two months of a sharp decline in sales in March and April as most parts of the country went into lockdown and massive job losses prevented people from risking their money in new homes. New home sales have now recouped the losses suffered when non-essential businesses were shuttered in mid-March to contain the spread of coronavirus.

Other Factors Helping Demand

Several factors are pushing new home sales as states continue to relax stay-at-home restrictions. Homebuilder sentiment bounced back in September. The National Association of Home Builders/Wells Fargo Housing Market Index climbed 5 points to 83. That’s the highest reading in the survey’s 35-year history, which matched its last all-time high in August. Anything above 50 is considered positive. The index stood at 68 in September 2019.

Coronavirus resulted in record job losses in April, and a collapse in manufacturing output and retail sales. People backed out from buying homes as they feared blocking their money by investing in property. However U.S. consumer confidence and consumer spending started improving since May, indicating that life is somewhat going back to normal.

A separate report last week showed that sales of previously owned homes also surged 2.4% to a seasonally adjusted annualized rate of 6 million units. Moreover, home-buying activity is getting another boost from record-low mortgage rates, which have dropped below 3% for a 30-year-fixed rate mortgage for the first time in nearly 50 years.

Our Choices

The rise in new home sales coupled with a jump in existing homes sales and homebuilder sentiment are indications that buyers are showing interest with the U.S. economy gradually reopening and people going back to work. In this opportune time to invest in homebuilding, we suggest five stocks with a Zacks Rank #1 (Strong Buy) and a VGM Score of A or B that are likely to gain ahead. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors. You can see the complete list of today’s Zacks #1 Rank stocks here.

MI Homes, Inc. MHO is one of the nation's leading builders of single-family homes. M/I Homes serves a broad segment of the housing market, including first-time, move-up, luxury and empty-nester buyers.

The company’s expected earnings growth rate for the current year is 36.7%. The Zacks Consensus Estimate for current-year earnings has improved 91.2% over the past 60 days. The company has a VGM Score of A.

M.D.C. Holdings, Inc. MDC engages in homebuilding and financial service businesses in the United States. It is engaged in the construction, sale and related financing of residential housing, and the acquisition and development of land for use in the Denver, Phoenix, Maryland, Virginia, mid-Atlantic region, Las Vegas, Dallas and California metropolitan areas.

The company’s expected earnings growth rate for the current year is 28.2%. The Zacks Consensus Estimate for current-year earnings has improved 59.5% over the past 60 days. The company has a VGM Score of A.

Meritage Homes Corporation MTH primarily engages in building and selling single-family homes for entry-level, first-time, move-up, luxury and active adult buyers in historically high-growth regions of the United States.

The company’s expected earnings growth rate for the current year is 43.7%. The Zacks Consensus Estimate for current-year earnings has improved 7.8% over the past 60 days. The company has a VGM Score of A.

Lennar Corporation LEN is engaged in homebuilding and financial services in the United States. The company’s reportable segments consist of Homebuilding, Lennar Financial Services, Rialto and Lennar Multifamily.

The company’s expected earnings growth rate for the current year is 25.4%. The Zacks Consensus Estimate for current-year earnings has improved 13.6% over the past 60 days. The company has a VGM Score of B.

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. Their objective is to provide customers with homes that incorporate quality and value.

The company’s expected earnings growth rate for the current year is 20.5%. The Zacks Consensus Estimate for current-year earnings has improved 118.5% over the past 60 days. The company has a VGM Score of B.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.

Click here for the 6 trades >>

Click to get this free report Beazer Homes USA, Inc. (BZH) : Free Stock Analysis Report Lennar Corporation (LEN) : Free Stock Analysis Report Meritage Homes Corporation (MTH) : Free Stock Analysis Report M.D.C. Holdings, Inc. (MDC) : Free Stock Analysis Report MI Homes, Inc. (MHO) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research