Homebuilder stocks had a huge year: What to watch for in 2024
Homebuilder stocks have surged this year, with Lennar (LEN) and D.R. Horton (DHI) both up more than 40%, while Pultegroup (PHM) is up 100% year-to-date.
BTIG does note that public builders are starting to saturate large metro areas, capping upside, and rate cuts could alter the landscape again. Yahoo Finance’s Dani Romero reports on this story and deep dives into the industry’s outlook on homebuilder stocks.
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Video Transcript
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AKIKO FUJITA: The rally on homebuilder stocks hasn't fizzled out just yet. With mortgage rates retreating and inflation abating, where does that leave homebuilder stocks coming in 2024? Let's bring in Yahoo Finance's Dani Romero with more on the industry's outlook. Dani.
DANI ROMERO: Akiko. Homebuilder stocks are on another tear once again. But there are three stocks that are really telling the story here. Lennar is up 44% this year, PulteGroup up 4-- up 100% this year, and D.R. Horton is up 45% this year.
So the gains really do highlight how bullish the attitude is coming from investors. Not only that, but homebuilders have been stepping up their game this year. During this high-interest rate environment, they've been offering incentives like those mortgage rate buy downs to bring in demand. That mortgage rate buy downs are once you up front the cost to lower down the rate on the loan that has been really, really a big incentive across all homebuilders.
But the moves from the homebuilders are really having Wall Street analysts expect that these public homebuilders will gain the market share for both new homes and overall transactions. There was a note from BTIG that really highlights this overall scenario. They say out of the 20 publicly-traded homebuilders, that they control nearly 2 million lots. And with today's average for new homes, which is around $478,000, that could equal to $975 billion in future revenue. Cha Ching.
But before the Cha Ching there is some headwinds for this sector ahead. They say, in this note, that the large metros are actually getting a little bit crowded by these public homebuilders so there's not that much head room for there. But the big question overall is will the homebuilders be as successful if there is any rate cuts. They've been very successful in a high interest rate environment but if that changes next year, what will happen? That's a-- we'll have to wait and see on that.
RACHELLE AKUFFO: Indeed. And something else will be waiting for. Toll Brothers reporting Q4 after the bell today. What can investors expect there?
DANI ROMERO: Toll Brothers has been really busy at work, especially this year. The third quart-- in the third quarter they blew past analysts expectations. The CEO Doug Yearley he even called out the country's housing stock lousy. A really-- a big key reason for this homebuilder, the success on this homebuilder, the company is forecasting for the fourth quarter to deliver between 2000 and 6-- 2,650 and 2,750 units between-- they'll have a price tag an average of $1 million on those homes. We'll have to wait and see after the bell on what really Toll Brothers comes out with their fourth quarter earnings. Rochelle.
RACHELLE AKUFFO: Certainly be keeping an eye on that. Appreciate you as always. Yahoo Finance reporter, Dani Romero.
