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5 Homebuilder Stocks to Buy on a Resilient US Housing Market

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The coronavirus pandemic did take a toll on the U.S. economy last year, with jobs losses, business shutdowns and many small firms filing for bankruptcy. But home mortgage rates remained low and many Americans bought new homes, helping the U.S. housing market stay afloat. In fact, research by JP Morgan has found that when mortgage rates go down by 100 basis points (bps), it generally leads to a 10% uptick in home sales.

Fascinatingly, the U.S. housing market has not only started this year on a strong note also is also likely to remain resilient in the upcoming months. This is because the Fed has already given ample indication that it’s going to keep interest rates at near-zero levels for some time. The central bank is willing to apply an accommodative monetary policy to pep up the economy and strengthen the labor market. At the same time, a low-interest environment means Americans can easily avail mortgage financing to purchase a house or refinance their homes. Needless to say, low-interest rate does boost outlays on interest-sensitive products like homes.

It’s also worth pointing out that borrowers had to weather the impact of the pandemic on the economy last year, which no doubt strained their finances. As a result, the request for mortgage forbearance climbed up. However, such a rise in requests for mortgage forbearance has now decreased significantly, a tell-tale sign that Americans are at present in a better position to have the funds for their mortgages, which also bodes well for the U.S. housing market. To put things into perspective, in April 2020, around 7.91% of servicers’ portfolio volume was in forbearance, which declined to 5.48% last December, as quoted in a MarketWatch article.

In fact, last December, housing starts increased at their best pace since 2006 as demand for single-family homes remained robust. To top it, building permits accelerated as low mortgage rates buoyed the U.S. housing market despite an uptick in lumber prices and shortage of skilled labor. No doubt, the coronavirus outbreak reduced the number of laborers at construction sites due to illness. But it’s also true that the breakthrough on the vaccine front will eventually reduce the rise in coronavirus cases and things should certainly be back to normal at construction sites in the near future.

Talking about construction spending, it actually hit a record high in December. Per the Commerce Department, as mentioned in a Reuters article, construction spending increased 1% to $1.490 trillion, the highest since the government started to track the data in 2002.

Hence, it can be safely concluded that the U.S. housing market is in better shape this year, which calls for investing in sound homebuilder stocks. Demand for new homes, in the meantime, is also being driven by people shifting their location from cities to suburbs or in areas with low-density population to avoid the virus outbreak. We have, thus, selected five homebuilder stocks that can make the most of the bullishness in the U.S. housing market. These stocks flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Beazer Homes USA, Inc. (BZH - Free Report) designs, builds and sells single family homes. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has risen nearly 14% over the past 60 days. The company’s expected earnings growth rate for the current year is 16.4%.

D.R. Horton, Inc. (DHI - Free Report) is one of the leading national homebuilders. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has risen 5.6% over the past 60 days. The company’s expected earnings growth rate for the current year is 30.4%.

KB Home (KBH - Free Report) is also a well-known homebuilder in the United States. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved up 19.7% over the past 60 days. The company’s expected earnings growth rate for the current year is 63.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lennar Corporation (LEN - Free Report) is engaged in homebuilding and financial services in the United States. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has climbed7.6% over the past 60 days. The company’s expected earnings growth rate for the current year is 8.3%.

M.D.C. Holdings, Inc. (MDC - Free Report) is engaged in the construction, sale and related financing of residential housing. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved4.4% north over the past 60 days. The company’s expected earnings growth rate for the current year is 17.9%.

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.

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