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Construction Activity Makes Solid Rebound: 5 Must-Buy Stocks
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Construction activity is fast gaining pace in the United States as inflation continues to ease and demand for single-family homes rebounds. The Commerce Department said last week that spending on construction projects soared more than expected in December.
The department reported that construction spending rose a solid 0.9% in December, surpassing the consensus estimate of 0.5%. Also, data for November was upwardly revised to 0.9% from the earlier reported 0.4%.
On a year-over-year basis, spending on construction projects increased 13.9% in December. Overall construction spending increased 7% for all of 2023. Investments in private construction projects jumped 0.7% in December after advancing 1.1% in the prior month.
Investments in public construction projects grew 1.3% in December after rising 0.5% in November.
Spending on residential construction projects climbed 1.4% in December, up from 1% in November. Most importantly, outlays on new single-family construction projects rose 1.6%.
Sky-high inflation compelled the Federal Reserve to adopt a strict monetary policy as it raised interest rates by 525 basis points since March 2022 to take its benchmark policy rate in the current range of 5.25-5.50%.
The homebuilding market was the mainstay of overall construction spending, but demand for newly made single-family homes started shrinking as mortgage rates soared. Higher interest rates weighed on consumer spending, which kept buyers away from the homebuilding market as the popular 30-year fixed-rate mortgage rates soared to a 23-year high of 7.79% in October.
However, easing inflation saw the Fed keeping interest rates unchanged in its last four FOMC meetings. The situation looks much better now as the 30-year fixed-rate mortgage rate is presently hovering around the mid-6% range.
Buyers are once again flocking to the markets, which is helping the construction sector. Moreover, the Federal Reserve has hinted at ending its monetary tightening campaign and will start rate cuts this year. Lower interest rates are further going to boost spending, which bodes well for the construction sector.
Our Choices
Given this situation, the housing market is expected to perform well in 2024, as rate cuts are going to help the broader economy. Investing in homebuilding stocks thus appears to be a wise decision. We have narrowed down our search to five homebuilding stocks such as Century Communities, Inc. (CCS - Free Report) , M.D.C. Holdings, Inc. ,Dream Finders Homes, Inc. (DFH - Free Report) , NVR, Inc. (NVR - Free Report) and PulteGroup (PHM - Free Report) . Each of these stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Century Communities, Inc. 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’expected earnings growth rate for the current year is 18.9%. The Zacks Consensus Estimate for current-year earnings has improved 12% over the past 60 days. CCS presently sports a Zacks Rank #1.
M.D.C. Holdings, Inc. is engaged in homebuilding and financial services in the United States. MDC’s Homebuilding operations include land acquisition and development, home construction, sales and marketing, as well as customer service. The segment delivers single-family detached homes to first-time and move-up buyers under the name Richmond American Homes.
M.D.C. Holdings’ expected earnings growth rate for the current year is 2.7%. The Zacks Consensus Estimate for current-year earnings has improved 2.5% over the past 60 days. MDC presently has a Zacks Rank #2.
Dream Finders Homes, Inc. is a homebuilding company. DFH operates principally in Florida, Texas, North Carolina, South Carolina, Georgia, Colorado, Virginia and Maryland. Dream Finders Homes is based in Jacksonville, FL.
Dream Finders Homes has an expected earnings growth rate of 2.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 5.5% over the last 60 days. DFH presently has 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. To serve homebuilding customers, NVR operates a mortgage banking and title services business.
NVR’sexpected earnings growth rate for the current year is 1.8%. The Zacks Consensus Estimate for current-year earnings has improved 15.5% over the past 60 days. NVR presently sports a Zacks Rank #1.
PulteGroup engages in homebuilding and financial services businesses, primarily in the United States. PHM conducts operations through two primary business segments — Homebuilding (which accounted for 97.2% of 2021 total revenues) and Financial Services (2.8%). PulteGroup’s Homebuilding segment offers a wide variety of home designs, including single-family detached, townhouses, condominiums and duplexes at different prices, with a variety of options and amenities to all major customer segments: first-time, move-up and active adult.
PulteGroup’s expected earnings growth rate for the current year is 1.7%. The Zacks Consensus Estimate for current-year earnings has improved 5.2% over the past 60 days. PHM has a Zacks Rank #2.
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Construction Activity Makes Solid Rebound: 5 Must-Buy Stocks
Construction activity is fast gaining pace in the United States as inflation continues to ease and demand for single-family homes rebounds. The Commerce Department said last week that spending on construction projects soared more than expected in December.
The department reported that construction spending rose a solid 0.9% in December, surpassing the consensus estimate of 0.5%. Also, data for November was upwardly revised to 0.9% from the earlier reported 0.4%.
On a year-over-year basis, spending on construction projects increased 13.9% in December. Overall construction spending increased 7% for all of 2023. Investments in private construction projects jumped 0.7% in December after advancing 1.1% in the prior month.
Investments in public construction projects grew 1.3% in December after rising 0.5% in November.
Spending on residential construction projects climbed 1.4% in December, up from 1% in November. Most importantly, outlays on new single-family construction projects rose 1.6%.
Sky-high inflation compelled the Federal Reserve to adopt a strict monetary policy as it raised interest rates by 525 basis points since March 2022 to take its benchmark policy rate in the current range of 5.25-5.50%.
The homebuilding market was the mainstay of overall construction spending, but demand for newly made single-family homes started shrinking as mortgage rates soared. Higher interest rates weighed on consumer spending, which kept buyers away from the homebuilding market as the popular 30-year fixed-rate mortgage rates soared to a 23-year high of 7.79% in October.
However, easing inflation saw the Fed keeping interest rates unchanged in its last four FOMC meetings. The situation looks much better now as the 30-year fixed-rate mortgage rate is presently hovering around the mid-6% range.
Buyers are once again flocking to the markets, which is helping the construction sector. Moreover, the Federal Reserve has hinted at ending its monetary tightening campaign and will start rate cuts this year. Lower interest rates are further going to boost spending, which bodes well for the construction sector.
Our Choices
Given this situation, the housing market is expected to perform well in 2024, as rate cuts are going to help the broader economy. Investing in homebuilding stocks thus appears to be a wise decision. We have narrowed down our search to five homebuilding stocks such as Century Communities, Inc. (CCS - Free Report) , M.D.C. Holdings, Inc. ,Dream Finders Homes, Inc. (DFH - Free Report) , NVR, Inc. (NVR - Free Report) and PulteGroup (PHM - Free Report) . Each of these stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Century Communities, Inc. 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’expected earnings growth rate for the current year is 18.9%. The Zacks Consensus Estimate for current-year earnings has improved 12% over the past 60 days. CCS presently sports a Zacks Rank #1.
M.D.C. Holdings, Inc. is engaged in homebuilding and financial services in the United States. MDC’s Homebuilding operations include land acquisition and development, home construction, sales and marketing, as well as customer service. The segment delivers single-family detached homes to first-time and move-up buyers under the name Richmond American Homes.
M.D.C. Holdings’ expected earnings growth rate for the current year is 2.7%. The Zacks Consensus Estimate for current-year earnings has improved 2.5% over the past 60 days. MDC presently has a Zacks Rank #2.
Dream Finders Homes, Inc. is a homebuilding company. DFH operates principally in Florida, Texas, North Carolina, South Carolina, Georgia, Colorado, Virginia and Maryland. Dream Finders Homes is based in Jacksonville, FL.
Dream Finders Homes has an expected earnings growth rate of 2.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 5.5% over the last 60 days. DFH presently has 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. To serve homebuilding customers, NVR operates a mortgage banking and title services business.
NVR’sexpected earnings growth rate for the current year is 1.8%. The Zacks Consensus Estimate for current-year earnings has improved 15.5% over the past 60 days. NVR presently sports a Zacks Rank #1.
PulteGroup engages in homebuilding and financial services businesses, primarily in the United States. PHM conducts operations through two primary business segments — Homebuilding (which accounted for 97.2% of 2021 total revenues) and Financial Services (2.8%). PulteGroup’s Homebuilding segment offers a wide variety of home designs, including single-family detached, townhouses, condominiums and duplexes at different prices, with a variety of options and amenities to all major customer segments: first-time, move-up and active adult.
PulteGroup’s expected earnings growth rate for the current year is 1.7%. The Zacks Consensus Estimate for current-year earnings has improved 5.2% over the past 60 days. PHM has a Zacks Rank #2.