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4 Home Furnishing Picks as New Home Sales Near 9-Year High
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New home sales raced close to a nine-year high in July, courtesy of cheap financing and increased hiring. Along with sales, homebuilding accelerated pointing to sustained buoyancy in the housing sector’s recovery.
Given these positives, investing in home furnishing will make a sensible move as such stocks are likely to gain from the renewed strength in the housing sector. To top it, home builders’ confidence about the current and future market conditions for new home sales also improved significantly.
New-Home Sales Rocket to Almost 9-Year High
Sales of newly built homes climbed to a fresh post-recession high in the month of July, a definite sign that the housing market is gaining ground. According to the Commerce Department, purchases of new single family homes were at a seasonally adjusted rate of 654,000 in July, which is up 12.4% from June and 31.3% from Jul 2015. New single family home sales touched the highest level this July since Oct 2007. In fact, through the first seven months of this year, new home sales jumped 12.4% from the same period last year.
Purchases in the south were the strongest in July. Sales soared 18.1% to a seasonally adjusted rate of 398,000, the highest since Jul 2007. While demand in the Midwest was the strongest since Nov 2007, Northeast posted gains.
Shares of Toll Brothers Inc. (TOL - Free Report) rallied 8.8% to close at 31.91 yesterday, hitting a seven-month high. Toll ended above its 200-day moving average for the first time since early Dec 2015. The rally followed the stellar new-home sales report (read more: Toll Brothers Shares Cross Above 200 DMA).
Another leading homebuilder PulteGroup (PHM - Free Report) also saw its shares rise 2.9%. The Atlanta-based homebuilder already enjoys a broad geographic and product diversity with a strong growth potential (read more: 4 Reasons to Add Pulte Stock to Your Portfolio Now).
What Drove Sales Higher?
Low mortgage rates, steady job addition and a raise in wages collectively boosted sales of new homes. According to Freddie Mac, the 30-year fixed rate mortgage was at 3.48% at the end of July, which was less than half a percentage point from the level a year ago. For the week ending Aug 18, the 30-year fixed mortgage rate dropped further to 3.43% (read more: What is Mortgage Rate?).
The job market has shown signs of approaching full employment. July’s nonfarm payrolls steered past analysts’ expectations by 255,000 job additions, which followed an upwardly revised 292,000 jobs in June, according to the Labor Department. While unemployment levels remained flat at 4.9%, wages inched up 0.3% and increased 2.6% on a yearly basis. Additionally, the average workweek rose by 0.1 hours to 34.5 hours last month. This is the largest increase recorded since the month of January (read more: 5 Stocks to Buy on Encouraging Employment Data).
Housing Starts Rise to a 5-Month High
Home construction also picked up pace in July. Residential starts increased 2.1% to a seasonally adjusted rate of 1.2 million units last month, the highest since February, according to the Commerce Department. Single family starts, the largest segment of the market, rose 0.5% to a seasonally adjusted rate of 770,000, also the highest since February.
The volatile multi-family segment, such as townhouses and apartment buildings, increased 5% to a seasonally adjusted rate of 441,000, the maximum since Sep 2015 (read more: 5 Stocks to Buy on Strong Housing Data).
Builders Gaining Confidence: 4 Home Furnishing Picks
New home sales kept up strong pace from June and surged higher in July, reflecting low mortgage rates coupled with an upbeat job market. Home building also gained momentum in July which makes us believe that strong demand for housing continues. Heading into August, homebuilder sentiment improved, with the housing market index coming in at 60, up from 58 in July, according to the National Association of Homebuilders.
Hence, it will be prudent to invest in fundamentally sound home furnishing stocks from the housing sector. Moreover, sales at home improvement and furniture stores gained 4.2% in July from the year-ago levels, according to the retail sales report by the U.S. Census Bureau.
We have selected four such stocks that sport a Zacks Rank #1 (Strong Buy) or 2 (Buy). Moreover, such stocks have seen their earnings estimates moving north in the last one month period.
Tempur Sealy International Inc. (TPX - Free Report) : This manufacturer and distributor of bedding products has seen the Zacks Consensus Estimate for its current year earnings climb 13.7% over the last 30 days. Tempur Sealy’s – a Zacks Rank #1 stock -- estimated growth for the current year is 31.2%.
Fortune Brands Home & Security, Inc. : This provider of home and security products has witnessed a 6.6% rise in the Zacks Consensus Estimate for its current year earnings over the last 30 days. Fortune Brands Home & Security’s estimated growth for the current year is 32.1%. The company carries a Zacks Rank #2.
Haverty Furniture Companies Inc. (HVT - Free Report) : This retailer of residential furniture and accessories has seen the Zacks Consensus Estimate for its current year earnings move north by 4.5% over the last 30 days. Haverty Furniture Companies’ estimated growth for the current year is 4.5% and it carries a Zacks Rank #2.
Louisiana-Pacific Corp.(LPX - Free Report) : This manufacturer and seller of building products, primarily for use in new home construction, witnessed a 13.7% rise in the Zacks Consensus Estimate for its current year earnings over the last 30 days. Louisiana-Pacific’s estimated growth for the current year is 333.3%. The company has a Zacks Rank #2.
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4 Home Furnishing Picks as New Home Sales Near 9-Year High
New home sales raced close to a nine-year high in July, courtesy of cheap financing and increased hiring. Along with sales, homebuilding accelerated pointing to sustained buoyancy in the housing sector’s recovery.
Given these positives, investing in home furnishing will make a sensible move as such stocks are likely to gain from the renewed strength in the housing sector. To top it, home builders’ confidence about the current and future market conditions for new home sales also improved significantly.
New-Home Sales Rocket to Almost 9-Year High
Sales of newly built homes climbed to a fresh post-recession high in the month of July, a definite sign that the housing market is gaining ground. According to the Commerce Department, purchases of new single family homes were at a seasonally adjusted rate of 654,000 in July, which is up 12.4% from June and 31.3% from Jul 2015. New single family home sales touched the highest level this July since Oct 2007. In fact, through the first seven months of this year, new home sales jumped 12.4% from the same period last year.
Purchases in the south were the strongest in July. Sales soared 18.1% to a seasonally adjusted rate of 398,000, the highest since Jul 2007. While demand in the Midwest was the strongest since Nov 2007, Northeast posted gains.
Shares of Toll Brothers Inc. (TOL - Free Report) rallied 8.8% to close at 31.91 yesterday, hitting a seven-month high. Toll ended above its 200-day moving average for the first time since early Dec 2015. The rally followed the stellar new-home sales report (read more: Toll Brothers Shares Cross Above 200 DMA).
Another leading homebuilder PulteGroup (PHM - Free Report) also saw its shares rise 2.9%. The Atlanta-based homebuilder already enjoys a broad geographic and product diversity with a strong growth potential (read more: 4 Reasons to Add Pulte Stock to Your Portfolio Now).
What Drove Sales Higher?
Low mortgage rates, steady job addition and a raise in wages collectively boosted sales of new homes. According to Freddie Mac, the 30-year fixed rate mortgage was at 3.48% at the end of July, which was less than half a percentage point from the level a year ago. For the week ending Aug 18, the 30-year fixed mortgage rate dropped further to 3.43% (read more: What is Mortgage Rate?).
The job market has shown signs of approaching full employment. July’s nonfarm payrolls steered past analysts’ expectations by 255,000 job additions, which followed an upwardly revised 292,000 jobs in June, according to the Labor Department. While unemployment levels remained flat at 4.9%, wages inched up 0.3% and increased 2.6% on a yearly basis. Additionally, the average workweek rose by 0.1 hours to 34.5 hours last month. This is the largest increase recorded since the month of January (read more: 5 Stocks to Buy on Encouraging Employment Data).
Housing Starts Rise to a 5-Month High
Home construction also picked up pace in July. Residential starts increased 2.1% to a seasonally adjusted rate of 1.2 million units last month, the highest since February, according to the Commerce Department. Single family starts, the largest segment of the market, rose 0.5% to a seasonally adjusted rate of 770,000, also the highest since February.
The volatile multi-family segment, such as townhouses and apartment buildings, increased 5% to a seasonally adjusted rate of 441,000, the maximum since Sep 2015 (read more: 5 Stocks to Buy on Strong Housing Data).
Builders Gaining Confidence: 4 Home Furnishing Picks
New home sales kept up strong pace from June and surged higher in July, reflecting low mortgage rates coupled with an upbeat job market. Home building also gained momentum in July which makes us believe that strong demand for housing continues. Heading into August, homebuilder sentiment improved, with the housing market index coming in at 60, up from 58 in July, according to the National Association of Homebuilders.
Hence, it will be prudent to invest in fundamentally sound home furnishing stocks from the housing sector. Moreover, sales at home improvement and furniture stores gained 4.2% in July from the year-ago levels, according to the retail sales report by the U.S. Census Bureau.
We have selected four such stocks that sport a Zacks Rank #1 (Strong Buy) or 2 (Buy). Moreover, such stocks have seen their earnings estimates moving north in the last one month period.
Tempur Sealy International Inc. (TPX - Free Report) : This manufacturer and distributor of bedding products has seen the Zacks Consensus Estimate for its current year earnings climb 13.7% over the last 30 days. Tempur Sealy’s – a Zacks Rank #1 stock -- estimated growth for the current year is 31.2%.
Fortune Brands Home & Security, Inc. : This provider of home and security products has witnessed a 6.6% rise in the Zacks Consensus Estimate for its current year earnings over the last 30 days. Fortune Brands Home & Security’s estimated growth for the current year is 32.1%. The company carries a Zacks Rank #2.
Haverty Furniture Companies Inc. (HVT - Free Report) : This retailer of residential furniture and accessories has seen the Zacks Consensus Estimate for its current year earnings move north by 4.5% over the last 30 days. Haverty Furniture Companies’ estimated growth for the current year is 4.5% and it carries a Zacks Rank #2.
Louisiana-Pacific Corp.(LPX - Free Report) : This manufacturer and seller of building products, primarily for use in new home construction, witnessed a 13.7% rise in the Zacks Consensus Estimate for its current year earnings over the last 30 days. Louisiana-Pacific’s estimated growth for the current year is 333.3%. The company has a Zacks Rank #2.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>