The U.S. economy has been battered by the coronavirus but the housing market remains unruffled. High demand for new and existing homes has been driving prices higher over the past few months since the economy started reopening.
Homebuilder confidence is on a record high and people are flocking to the markets to buy home. The key factor behind this buying spree is record-low mortgage rate. Mortgage rates fell to yet another record low last week, indicating that it is going to help the homebuilding market further.
Mortgage Rate Hits Another Record Low
Last week, mortgage rates fell to the 14th record low in 2020. According to the Mortgage Bankers Association (MBA), the average 30-year-fixed mortgage rate with confirming balances fell to 2.90% from 2.92%. This is the lowest since the MBA started conducting the survey.
Moreover, mortgage applications for reapplication jumped 2% last week from the week earlier, up a whopping 89% from last year. No doubt the historically-low mortgage rate has been a boon to the housing market, especially when the other industries have been jolted by the pandemic.
Boom Time for Housing Market
Higher demand for homes has resulted in a shortage of supply, which is further inflating prices. However, buyers don’t seem to be shelling out the extra bucks given the low mortgage rates.
According to a report from the Federal Housing Finance Agency, U.S. home prices jumped a record 3.1% in the third quarter from the prior quarter and 7.8% rise from the year-ago level.
Besides, homebuilder confidence is on an all-time high. According to the National Association of Home Builders’ Wells Fargo Housing Market Index, homebuilder confidence for single-family homes hit a record high in November, with the index reading 90. It was the third consecutive month when homebuilder sentiment hit a new high. The index read 71 in the year-earlier period.
Moreover, demand for new and existing homes at this time is generally unusual but this year has been completely different. With mortgage expected to remain low, it is likely that the homebuilding market will benefit in the near term as increasing demand coupled with a shortage in supply will continue to push prices up.
Record low mortgage rate is helping to boost home prices, which is making people rush to buy homes. This has been the reason behind the jump in mortgage applications also. Moreover, a jump in new and existing homes sales is 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) or 2 (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 20.6% over the past 60 days. The company sports a Zacks Rank #1.
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 82.3%. The Zacks Consensus Estimate for current-year earnings has improved 33.3% over the past 60 days. The company has a Zacks Rank #2.
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. The company sports a Zacks Rank #1.
Toll Brothers Inc. TOL builds single-family detached and attached home communities; master planned luxury residential resort-style golf communities; and urban low, mid, and high-rise communities, principally on the land it develops and improves.
The company’s expected earnings growth rate for next year is 39.4%. The Zacks Consensus Estimate for current-year earnings has improved 1.7% over the past 60 days. The company carries a Zacks Rank #2.
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Click to get this free report Toll Brothers Inc. (TOL) : Free Stock Analysis Report TRI Pointe Group, Inc. (TPH) : Free Stock Analysis Report Beazer Homes USA, Inc. (BZH) : Free Stock Analysis Report MI Homes, Inc. (MHO) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research