Mortgage rates slipped to another record low last week, hinting at higher propensity to buy homes going ahead.
The 30-year, fixed-rate mortgage dropped by a basis point from the prior week to 2.71% for the week ended Dec 3, 2020, according to mortgage finance agency Freddie Mac. This marks the 14th record low that Freddie Mac has reported so far in 2020. In the year-ago period, it was 3.68%. Notably, rising need for more work-at-home space and record-low borrowing costs have been aiding the housing market that displayed stern resilience to the economic impacts of the coronavirus pandemic. In fact, mortgage rates have been slipping to all-time lows following the Fed's emergency interest-rate cuts. Fed’s decision to keep interest rates near zero moving into 2024 should keep the momentum alive in the housing industry. The recent home sales pace also mirrors the upbeat housing market scenario. Existing-home sales — accounting for more than 90% of total U.S. home sales — continued to trend upward in October (up 4.3% from the prior month and 26.6% from a year ago). This marked five consecutive months of month-over-month gains, according to the National Association of Realtors or NAR. Lawrence Yun, NAR's chief economist said, "With news that a COVID-19 vaccine will soon be available, and with mortgage rates projected to hover around 3% in 2021, I expect the market's growth to continue into 2021." Yun forecasts existing-home sales growth of 10% to 6 million in 2021. Also, October new home sales did not change much from the previous month but are up 41.5% from the same period a year earlier. Hence, sales of new homes remain steady despite the home-buying season now entering the fall. Is Low Inventory a Threat to Housing?
The United States is faced with serious housing shortage. Although record-low interest rates have helped the U.S. housing market gain a strong footing this year, low inventory remains a challenge for home buyers, which has been pushing prices higher. The median existing-home price in October was up 15.5% from a year ago, with higher prices in every region.
Nevertheless, despite extremely tight supply and rising prices, home sales have been running at their strongest pace in over a decade. Notably, mortgage applications to purchase a home jumped 9% for the week ended Nov 27, 2020 from the previous week, according to the Mortgage Bankers Association’s seasonally and holiday adjusted index. Purchase applications were a solid 28% higher from a year ago. Applications to refinance a home loan fell 5% for the week but were an impressive 102% higher than a year ago. The housing industry has gained 19.3% year to date, outperforming the broader Construction sector and S&P 500 composite’s 12.1% and 14.2% rally, respectively. Keeping in mind the positive momentum and optimism surrounding growth potential, momentum investing should be a winning strategy for investors seeking higher returns in a short spell. Stocks in Focus
Investors can keep an eye on the following top-ranked housing stocks that are capitalizing on the positive aspects of the industry defying all odds.
Williams-Sonoma, Inc. ( WSM Quick Quote WSM - Free Report) : This multi-channel specialty retailer of premium quality home products has been benefiting from solid housing market, focus on digital initiatives, higher e-commerce penetration and product introductions. Zacks Rank #1 (Strong Buy) VGM Score A EPS Growth Rate (F1): 65.5% You can see . the complete list of today’s Zacks #1 Rank stocks here Toll Brothers Inc. ( TOL Quick Quote TOL - Free Report) : Favorable housing backdrop, lack of competition in the luxury new home market and buyout synergies have been driving this Horsham, PA-based homebuilder. Zacks Rank #1 VGM Score B EPS Growth Rate for fiscal 2021: 53.7% PulteGroup, Inc. ( PHM Quick Quote PHM - Free Report) : Based in Atlanta, GA, this homebuilder has been benefiting from improving housing market prospects, prudent land investments strategy, focus on entry-level buyers and enough liquidity as well as prudent management of cash flow. Zacks Rank #1 VGM Score A EPS Growth Rate (F1): 41.3% TRI Pointe Group Inc. ( TPH Quick Quote TPH - Free Report) : This Irvine, CA-based homebuilder designs, constructs and sells single-family detached and attached homes in the United States. Zacks Rank #1 VGM Score B EPS Growth Rate (F1): 27.9% Century Communities, Inc. ( CCS Quick Quote CCS - Free Report) : This Greenwood Village, CO-based homebuilder’s record backlog and lot supply coupled with extensive footprint across diversified, high-growth markets have been boosting organic growth. Zacks Rank #1 VGM Score B EPS Growth Rate (F1): 25.9% 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. Today, See These 5 Potential Home Runs >>