- (1:00) - The Housing Mania Begins
- (6:35) - Will The Economy Continue Booming With Millennial Generation?
- (10:00) - Are People Fleeing The Cities For The Suburbs?
- (18:10) - What Markets In The U.S Are Hot Right Now and Whose Buying?
- (25:45) - Is Another Housing Bubble Forming?
- (30:00) - Who Are The Major Players In Home Building?
- (37:15) - Episode Roundup: LEN, TOL, DHI, ITB, HD
Welcome to Episode #241 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.
But this was a special week of the Zacks Market Edge as Zacks Senior Strategist, Kevin Cook, decided to take on the hosting duties and interview Tracey about one of her favorite topics: the US housing market.
Housing has healed from the bubble and bust from a decade ago. But with the largest generation of Americans, the Millennials, reaching the age of marriage and family formation, the housing industry is waking up to a supply problem.
There simply aren’t enough homes.
Inventory for existing homes is only at 3 months. 6 months is a balanced market. New home sales have also lagged as builders have been conservative not to overbuild, after getting burned a decade ago during the bubble.
Could This Be a Golden Era for Housing?
The supply and demand metrics are there. Baby Boomers are selling homes in the north to move to the sunshine. Meanwhile, Millennials are also on the move from city center apartments to single family homes, often in the suburbs.
The home builders believe that the strong demand they have seen in the summer of 2020 for new homes is sustainable long after the COVID pandemic passes.
Lennar (LEN - Free Report) and Toll Brothers (TOL - Free Report) both talked about the strong demand in all geographies on their recent conference calls.
Earnings estimates are up for the entire group, which sports Zacks Rank #1 (Strong Buy) or #2 (Buy) rankings.
There are several national home builders investors could consider in addition to Toll Brothers and Lennar, such as D.R. Horton (DHI - Free Report) . Earnings are expected to be up 37% this fiscal year and another 11% next year.
It still has attractive valuations, with a forward P/E of just 12.
Look Beyond the Builders
While the home builders will be one of the big winners in the coming boom, there are other ways to play the bullish housing market.
All the ancillary businesses will benefit too including Home Depot (HD - Free Report) and the other kitchen, bath, and cabinet suppliers.
Those who manufacture paint, furniture, flooring and appliances should also be on your list.
Instead of trying to pick the winners, why not buy a basket of the whole group, both builders and the side industries like the retailers, by buying the iShares US Home Construction ETF (ITB - Free Report) ?
It has 44 holdings, with its largest being D.R. Horton. But it also includes other industries such as paint maker Sherwin Williams and Home Depot.
The ITB has soared in 2020, up 26% year-to-date. It has an expense ratio of 0.42%.
What else should you know about the coming boom?
Tune into this week’s podcast, hosted by Kevin with Tracey in the hot seat, to find out.
[In full disclosure, Tracey owns shares of MDC mentioned on the podcast.]
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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