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The homebuilding industry has played a major role in driving spending on construction projects. Demand for new homes has seen home sales skyrocket over the past year, encouraging homebuilders to invest more in construction projects.
Higher spending on construction projects at the same time indicates that the U.S. economy is on track for a steady recovery, despite rising costs. Against this backdrop, stocks like D.R. Horton, Lennar Corporation, Century Communities and NVR, Inc are likely to benefit.
Construction Spending Increases
The Commerce Department said on Apr 1 that spending on construction projects in the United States increased 0.5% in February to an annual rate of $1.704 trillion after rising 1.6% to a revised rate of $1.696 trillion in January.
Although this is lower than January's growth and economists' expectations of a 1% rise, the good sign is that spending has continued despite rising costs and higher interest rates. According to the report, spending on private construction projects increased 0.8% to $1.354 trillion. This included a 1.1% rise in spending on the construction of homebuilding projects and a 0.2% increase in non-residential private construction projects.
However, spending on public construction declined 0.4% to $350.7 billion. This was primarily because spending on both educational and highway construction projects fell 1.3% each.
Homebuilding Market on Solid Ground
The homebuilding market has been the mainstay of construction spending for some time now. Demand for new homes was already high and the pandemic gave a further boost as people scrambled to buy new homes as markets reponed since many wanted to move to less densely populated places.
This saw demand soaring, giving a boost to homebuilders' confidence that saw them investing more in construction projects. Although sales of new homes fell in February, the overall market is on solid ground.
Demand for single-family homes has been on the rise almost throughout 2021, making it a great year for the homebuilding industry. This is despite rising prices of raw materials and higher labor costs and mortgage rates.
Another reason behind homebuilders investing more in new home projects is that they had anticipated interest rates would increase and more people would buy homes in the near term. Further, future rate hikes would slow the pace of purchases.
Our Choices
In terms of overall construction activity, homebuilding remains a bright area. Private residential construction spending picked up to cater to the escalating demand for new homes, thus making for the right opportunity to invest in homebuilding stocks.
D.R. Horton is one of the leading national homebuilders, primarily engaged in the construction and the sale of single-family houses both in the entry-level and move-up markets. DHI's operations are spread over 91 markets across 29 states in the East, Midwest, Southeast, South Central, Southwest and West regions of the United States. D.R. Horton's houses are sold under the brand names D.R. Horton - America's Builder, Emerald Homes, Express Homes and Freedom Homes.
D.R. Horton's expected earnings growth rate for the current year is 39.2%. The Zacks Consensus Estimate for current-year earnings has improved 2.7% over the past 60 days. DHI has a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Lennar Corp. is engaged in homebuilding and financial services in the United States. LEN's reportable segments consist of Homebuilding, Lennar Financial Services, Rialto and Lennar Multifamily. Despite the varied product portfolio, homebuilding remains Lennar Corporation's core business.
Lennar Corporation's expected earnings growth rate for the current year is 15.1%. The Zacks Consensus Estimate for current-year earnings has improved 3% over the past 60 days. LEN carries a Zacks Rank #2.
Century Communities is a home building and construction company. CCS's activities comprise land acquisition, development, and entitlements; and the acquisition, development, construction, marketing, and sale of various single-family detached and attached residential home projects. Century Communities operates in major metropolitan markets in Colorado, Texas and Nevada. Century Communities, Inc. is based in Greenwood Village, CO.
Century Communities' expected earnings growth rate for the current year is 19.1%. The Zacks Consensus Estimate for current-year earnings has improved 5.1% over the past 60 days. CCS sports a Zacks Rank #1.
NVR, Inc. is engaged in the construction and sale of single-family detached homes, townhomes and condominium buildings, all of which are primarily constructed on a pre-sold basis. In order to serve homebuilding customers, NVR operates a mortgage banking and title services business. NVR operates in two business segments: Homebuilding and Mortgage Banking.
NVR's expected earnings growth rate for the current year is 39.8%. The Zacks Consensus Estimate for current-year earnings has improved 10.3% over the past 60 days. NVR has a Zacks Rank #2.
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Join us on Facebook: https://www.facebook.com/ZacksInvestmentResearch/ Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Industry Outlook Highlights D.R. Horton, Lennar Corporation, Century Communities, and NVR
For Immediate Release
Chicago, IL – April 6, 2022 – Today, Zacks Equity Research discusses D.R. Horton (DHI - Free Report) , Lennar Corporation (LEN - Free Report) , Century Communities (CCS - Free Report) and NVR, Inc (NVR - Free Report)
Industry: Homebuilding
Link: https://www.zacks.com/stock/news/1893075/homebuilding-industry-driving-construction-spending-4-picks
The homebuilding industry has played a major role in driving spending on construction projects. Demand for new homes has seen home sales skyrocket over the past year, encouraging homebuilders to invest more in construction projects.
Higher spending on construction projects at the same time indicates that the U.S. economy is on track for a steady recovery, despite rising costs. Against this backdrop, stocks like D.R. Horton, Lennar Corporation, Century Communities and NVR, Inc are likely to benefit.
Construction Spending Increases
The Commerce Department said on Apr 1 that spending on construction projects in the United States increased 0.5% in February to an annual rate of $1.704 trillion after rising 1.6% to a revised rate of $1.696 trillion in January.
Although this is lower than January's growth and economists' expectations of a 1% rise, the good sign is that spending has continued despite rising costs and higher interest rates. According to the report, spending on private construction projects increased 0.8% to $1.354 trillion. This included a 1.1% rise in spending on the construction of homebuilding projects and a 0.2% increase in non-residential private construction projects.
However, spending on public construction declined 0.4% to $350.7 billion. This was primarily because spending on both educational and highway construction projects fell 1.3% each.
Homebuilding Market on Solid Ground
The homebuilding market has been the mainstay of construction spending for some time now. Demand for new homes was already high and the pandemic gave a further boost as people scrambled to buy new homes as markets reponed since many wanted to move to less densely populated places.
This saw demand soaring, giving a boost to homebuilders' confidence that saw them investing more in construction projects. Although sales of new homes fell in February, the overall market is on solid ground.
Demand for single-family homes has been on the rise almost throughout 2021, making it a great year for the homebuilding industry. This is despite rising prices of raw materials and higher labor costs and mortgage rates.
Another reason behind homebuilders investing more in new home projects is that they had anticipated interest rates would increase and more people would buy homes in the near term. Further, future rate hikes would slow the pace of purchases.
Our Choices
In terms of overall construction activity, homebuilding remains a bright area. Private residential construction spending picked up to cater to the escalating demand for new homes, thus making for the right opportunity to invest in homebuilding stocks.
D.R. Horton is one of the leading national homebuilders, primarily engaged in the construction and the sale of single-family houses both in the entry-level and move-up markets. DHI's operations are spread over 91 markets across 29 states in the East, Midwest, Southeast, South Central, Southwest and West regions of the United States. D.R. Horton's houses are sold under the brand names D.R. Horton - America's Builder, Emerald Homes, Express Homes and Freedom Homes.
D.R. Horton's expected earnings growth rate for the current year is 39.2%. The Zacks Consensus Estimate for current-year earnings has improved 2.7% over the past 60 days. DHI has a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Lennar Corp. is engaged in homebuilding and financial services in the United States. LEN's reportable segments consist of Homebuilding, Lennar Financial Services, Rialto and Lennar Multifamily. Despite the varied product portfolio, homebuilding remains Lennar Corporation's core business.
Lennar Corporation's expected earnings growth rate for the current year is 15.1%. The Zacks Consensus Estimate for current-year earnings has improved 3% over the past 60 days. LEN carries a Zacks Rank #2.
Century Communities is a home building and construction company. CCS's activities comprise land acquisition, development, and entitlements; and the acquisition, development, construction, marketing, and sale of various single-family detached and attached residential home projects. Century Communities operates in major metropolitan markets in Colorado, Texas and Nevada. Century Communities, Inc. is based in Greenwood Village, CO.
Century Communities' expected earnings growth rate for the current year is 19.1%. The Zacks Consensus Estimate for current-year earnings has improved 5.1% over the past 60 days. CCS sports a Zacks Rank #1.
NVR, Inc. is engaged in the construction and sale of single-family detached homes, townhomes and condominium buildings, all of which are primarily constructed on a pre-sold basis. In order to serve homebuilding customers, NVR operates a mortgage banking and title services business. NVR operates in two business segments: Homebuilding and Mortgage Banking.
NVR's expected earnings growth rate for the current year is 39.8%. The Zacks Consensus Estimate for current-year earnings has improved 10.3% over the past 60 days. NVR has a Zacks Rank #2.
Why Haven't You Looked at Zacks' Top Stocks?
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and+95.3%. Today you can access their live picks without cost or obligation.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.