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Housing Market Poised to Get Further Boost: 5 Winners

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The housing market in the United States has been on a tear over the past few months. Both existing and new home sales have hit record highs, and homebuilder confidence has been on the rise. However, at the same time, home prices have skyrocketed.

However, the scene might look different with the change of government, given that newly elected President Joe Biden has proposed a new policy, which might help new homebuyers. Biden has proposed a $15,000 first-time homebuyer tax credit that can be used to make down payments, thus helping in taking off the burden to a great extent.

Biden’s New Policy to Help New Homebuyers 

Although new home sales have witnessed a steady rise since the economy started reopening in June, barring December, housing prices also have been rising. This has been making it difficult for many to make payments. Biden’s $15,000 first-time homebuilder tax credit, if sanctioned, can solve the problem of several Americans by making homes affordable, much like the $7,500 first-time homebuyer credit established under the Obama administration through the Housing and Economic Recovery Act.

First-time buyers are defined as those who haven’t bought a home in at least three years. This makes up for 32% of the overall home buyers in November 2020, according to National Association of Realtors. The $15,000 first-time homebuilder tax is likely to help all these homebuyers who have been struggling to make down payments due to the high home prices and strict lending standards.

Low Mortgage Rate Boosting Home Prices

Following the coronavirus outbreak, the government took steps to curb the negative economic impact and decided to cut interest rates to near zero. The result was record-low mortgage rates. Currently, the mortgage rate for a 30-year fixed-rate loan is at 2.65%.

Record-low mortgage rates saw new homebuyers flocking to the market as a result of which demand increased, thus pushing up prices. According to a CNBC report, home price rose to its fastest pace in six years, reaching 8% higher in November on a year-over-year basis. This plan could thus help make things easier for new homebuyers and at the same time create another boom in the homebuilding market.

Our Choices

The homebuilding market has already been doing well. However, record-low mortgage rates have worked both in favor and against buyers. The new proposal might help first-time homebuyers, thus giving the housing market a further boost. In this opportune time to invest in homebuilding, we suggest five stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) that are likely to gain ahead. You can see the complete list of today’s Zacks #1 Rank stocks here.

D.R. Horton, Inc. (DHI - Free Report) is one of the leading national homebuilders, primarily engaged in the construction and sale of single-family houses both in the entry-level and move-up markets.

The company’s expected earnings growth rate for next year is 25.1%. The Zacks Consensus Estimate for current-year earnings has improved 1.3% over the past 60 days.  The company has a Zacks Rank #2.

KB Home (KBH - Free Report) is a well-known homebuilder in the United States. The company’s Homebuilding operations include building and designing homes that cater to first time, move-up and active adult homebuyers on acquired or developed lands.

The company’s expected earnings growth rate for next year is 63.3%. The Zacks Consensus Estimate for current-year earnings has improved 19.7% over the past 60 days.  The company sports a Zacks Rank #1.

Lennar Corporation (LEN - Free Report)  is engaged in homebuilding and financial services in the United States. The company’s reportable segments consist of Homebuilding, Lennar Financial Services, Rialto and Lennar Multifamily.

The company’s expected earnings growth rate for the current year is 8.3%. The Zacks Consensus Estimate for current-year earnings has improved 7.6% over the past 60 days. The company sports a Zacks Rank #1.

M.D.C. Holdings, Inc. (MDC - Free Report) engages in homebuilding and financial service businesses in the United States. It is engaged in the construction, sale and related financing of residential housing and the acquisition and development of land for use in the Denver, Phoenix, Maryland, Virginia, mid-Atlantic region, Las Vegas, Dallas and California metropolitan areas. 

The company’s expected earnings growth rate for the current year is 37.4%. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the past 60 days. The company carries a zacks Rank #2.

PulteGroup, Inc. (PHM - Free Report) engages in homebuilding and financial services businesses, primarily in the United States. The company conducts operations through two primary business segments — Homebuilding and Financial Services.

The company’s expected earnings growth rate for the current year is 41.3%. The company’s shares have gained 2.4% in the past 30 days. PulteGroup has a Zacks Rank #2.

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