CBPX vs. PGTI: Which Stock Should Value Investors Buy Now?
After increasing for most of the spring, mortgage rates dipped for the week ending Jul 5 to the lowest level since mid-April, renewing hope for would-be homebuyers. Notably, the cost of borrowing fell in five of the past six weeks.
According to Freddie Mac, the average interest rate on a 30-year fixed-rate mortgage was 4.52% in the week ending Jul 5 compared with 4.55% in the week earlier. The 15-year fixed-rate mortgage averaged 3.99%, down five basis points, while the five-year adjustable-rate mortgage was 3.74%, down from 3.87%.
Bond yields declined simultaneously with mortgage rates given the speculation of escalating U.S.-China trade war. The benchmark 10-year Treasury yield has been declining, as demand for safe-haven assets increased. The yield peaked in May to 3.11% and has since then dipped to 2.83% for the week ending Jul 3.
Source: Freddie Mac
Relief for Homebuyers?
Although the recent declines bring some respite for buyers, builders are increasingly concerned that tariffs placed on Canadian lumber and other imported products are already hurting housing affordability. Record-high lumber prices have added nearly $9,000 to the price of a new single-family home since January 2017. Additionally, the U.S. Government’s recent move of imposing tariff on imported steel and aluminum has also raised concerns over the construction sector.
Meanwhile, rising mortgage rates, in anticipation of higher rates of inflation and further monetary tightening by the Fed, is equally damaging to investor sentiment toward the housing industry.
Challenges like inventory shortage are prevailing in the U.S. real estate market and creating upward pressure on prices in several parts of the country, thereby affecting affordability. Per the latest report from CoreLogic, the real estate data company, the nationwide home price index was 7.1% higher in May when compared with a year earlier. On a month-over-month basis, prices increased by 1.1% in May compared with April. CoreLogic’s home price index has dipped just once in the past 12 months. The real estate data company also expects the national home price index to grow 5.1% in May 2019 from May 2018.
Nonetheless, declining mortgage rates along with robust economic and job market scenario should create ample room for growth.
Alongside its pricing report, CoreLogic also conducted an extensive consumer housing sentiment study that revealed the strong desire for homeownership over the long-term among renters in markets having the highest home-price growth. The report reveals, across the United States, 15% of homeowners and 28% of renters have expressed their desire to buy a home in the next 12 months, while only 11% have hinted at selling.
It clearly shows that as the economy continues to improve and the millennial generation comes of age, pent-up demand for homes will continue to be released. After all, a low supply level in both new and existing homes ensures strong demand and pricing.
The recent sales figure has also been encouraging. According to a report released by the Census Bureau and Department of Housing and Urban Development, sales of newly constructed single-family homes hit a six-month high in May, increasing 6.7% month over month and 14.1% year over year.
Also, housing starts made a comeback in May with a 5% increase, reaching the highest level since 2007. The figure also improved 20.3% on a year-over-year basis. Single-family and multi-family starts surged in May.
With solid economic fundamentals in place, the overall homebuilding picture is pretty encouraging for 2018.
4 Must-Buy Housing Stocks
Adding some housing stocks to your portfolio looks like a smart move at this point, as there are plenty of reasons to be optimistic about the broader housing sector over both the short and the long term. However, picking winning stocks may be difficult.
With the help of the Zacks Stock Screener, we have zeroed in on four stocks that have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and favorable metrics. A top Zacks Rank indicates that these stocks have been witnessing positive estimate revisions, which generally translates into rapid price appreciation.
Lennar Corporation LEN flaunts a Zacks Rank #1. The Zacks Consensus Estimate for earnings for 2018 and 2019 has increased 12.2% and 2.4%, respectively, in the last 60 days, thus reflecting optimism about the stock’s prospects. The company’s EPS is expected to grow 37.5% in 2018 and 30.7% in 2019.
M.D.C. Holdings MDC sports a Zacks Rank #1. The Zacks Consensus Estimate for current-year earnings has been revised 6.5% upward for 2018 and 5.2% for 2019 over the past 60 days. The Zacks Consensus Estimate for EPS growth is projected at 32.6% for 2018 and 12.3% for 2019. You can see the complete list of today’s Zacks #1 Rank stocks here.
Meritage Homes Corporation MTH carries a Zacks Rank #2. The Zacks Consensus Estimate for earnings for 2018 and 2019 has increased 2.4% and 0.3%, respectively, in the past 60 days. The company’s EPS is expected to grow 42.5% in the current year and 5.9% for the next.
TRI Pointe Group, Inc. TPH also current carries a Zacks Rank #2. The Zacks Consensus Estimate for current-year earnings has been revised 0.5% upward for 2018 over the past 60 days. The Zacks Consensus Estimate for EPS growth is projected at 31% for 2018 and 14.3% for 2019.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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