Can homebuilder stocks defy the odds in 2024?
Homebuilder stocks soared in 2023, with notable gains in companies such as D.R. Horton (DHI), which is up 71%, Lennar (LEN) which is up 65%, and Beazer Homes (BZH) which is up 168%.
Despite concerns about high interest rates and affordability, these companies have reported solid performances in the fourth quarter, expecting new order and delivery growth in the upcoming quarters.
Other major players like Toll Brothers (TOL) also anticipate growth in 2024 and are strategically planning to expand communities and be prepared with inventory for the Spring selling season.
Yahoo Finance's Jared Blikre breaks down this numbers—weighing in on what the industry can expect in 2024.
For more Yahoo Finance housing coverage:
'Silver tsunami' to reshape the housing market: Meredith Whitney
2024 home buying season will be better than 2023: Economist
Housing market has looked 'bubblicious': Economist
Top housing markets for 2024: Realtor.com
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Video Transcript
BRIAN SOZZI: Homebuilder stocks rode a wave of momentum this year. Despite a housing shortage and higher interest rates, investors want to know, can homebuilders still beat the odds next year? "Yahoo Finance's" Jared Blikre is at the YFI interactive with the breakdown. Jared?
JARED BLIKRE: That's right. Market dominance by the homebuilders, you thought those 8% mortgages would get in the way, that is not the case. Just check out this homebuilders year-to-date heatmap that we have here. Some of the lesser gains are to the left. And the bigger ones, we got DHI, That's up to 71%, Lennar, 65%. I'll get to them in a second.
But check out Beazer Homes. That's up 168%. And just check out what's happened over the last five years. Just really exploding this year. So it's been really interesting to see homebuilders at record highs with industrials and tech stocks at record highs, it really is the case that over the last two months, a lot of things have been swept up in this rally.
Here's Hovnanian Enterprises. Another story, record high right here. But let's focus on Lennar right now. Lennar up 65%. They had a solid quarter in Q4. This was despite ongoing pressure from interest rates and affordability. They expect Q1 guidance to show new order and delivery growth compared to last year. And last quarter-- and this is another stock that is ending at a record high here in this year. Up 280% over the last five years.
We can also take a look at D.R. Horton, as I call them. Very similar chart there. They recently said they expect home delivery to grow in the home-- excuse me. They recently said they expect home delivery to grow in 2024, despite housing market conditions. And then you can take a look at Toll Brothers, as well.
Here, we have Toll up 108%, 214% over the last five years. CEO Doug Yearley noted plans to expand communities by about 10% in 2024. And aim to be ready with inventory, when a drop in rates coincides with the spring selling season. So let's take a look at those rates that we've been talking about. As I said, they reached 8%. And we are off of those highs considerably down 6.6%, 7%.
And, by the way, that's for a 30-year. 15-year, a bit lower at 5.95%. But it was a pretty steady rise into the middle of October here. But you take a look at new home sales, barely dented. So the time frame is a little different here. This goes back about five years, but ending the year-- let's say this is about 20-- the beginning of the year, we are ending down only slightly. This is $590,000.
At the beginning of the year, we are looking at about $620,000, something in that range. So it really hasn't suffered as much as a lot of analysts thought they would. And for that matter, it was logical to think that there might be a bit of a dip here, but it just goes to the secular strength of the argument that we still don't have enough homes for the people who need them. And it's going to take years for the supply imbalance to reassert to find an equilibrium.
BRIAN SOZZI: Jared, I just want you to know, I will be calling that company, D.R. Horton, for the next 75 years, until [? I get hired. ?]
JARED BLIKRE: It was done to me two years ago, never looked back.
BRIAN SOZZI: All right. Dr. Blikre, thank you so much.
