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Existing Home Sales Jump in January: 5 Solid Stocks to Buy

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Existing home sales rose yet again in January despite rising home prices. Understandably, the rise is being fueled by arecord low mortgage rate, which is pushing people to buy homes despite a decline in contracts.

The pandemic saw most major industries taking a hit. However, the homebuilding market has been on a tear ever since the economy reopened with people flocking to the market to buy house.

Existing Home Sales Rise in January

On Feb 19, the National Association of Realtors said that existing home sales jumped 0.6% in January to a seasonally adjusted annual rate of 6.69 million units after increasing 0.9% in December to 6.65 million units. On a year-over-year basis, existing home sales jumped 23.7% in January. Existing homes account for majority of the home sales in the United States.

The rise in January comes on the back of an impressive 2020 despite the pandemic creating ruckus in other industries. The demand for homes can be gauged from the lesser number of houses available in the market, which is also pushing prices. January saw a record-low 1.04 million previously owned homes up for sale, which saw the median price for existing homes surge 14.1% to $303,900 from a year ago.

Low Mortgage Rate Helping Home Sales

Record low mortgage rates have been helping home sales and the trend is likely to boost the market in the future too. Mortgage rates fell to their 14th record low in 2020 and are expected to remain so for the next few months, favoring the housing market.

The housing market took a hit in April and May when the government shut down almost everything, with sales almost coming to a standstill. However, as the economy reopened, people started flocking to the housing market. Since then there has been no looking back for the housing market.

The pandemic compelled many to leave big cities and settle in smaller towns that helped drive home sales. Moreover, record-low mortgage rate is acting as a tailwind for the housing sector. Interestingly, the rise comes despite a decline in housing starts in January, although it was after a gap of five months.

There were already fewer homes compared to the high demand before the pandemic, and now fewer homeowners are willing to list their homes for sale. This is further helping boost home prices and the trend is likely to continue in the days to come.

Our Choices

Record low mortgage rate is helping boost home prices, which is giving a boost to new and existing homes sales. This also reflects the strength in the economy. This thus makes for an opportune time to invest in homebuilding stocks.

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 carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Century Communities, Inc. (CCS - Free Report) is a home building and construction company. Its activities comprise land acquisition, development, and entitlements; and the acquisition, development, construction, marketing, and sale of various single-family detached and attached residential home projects. 

The company’s expected earnings growth rate for the current year is 33.8%. The Zacks Consensus Estimate for current-year earnings has improved 38.2% over the past 60 days. Century Communities sports a Zacks Rank #1.

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 41%. The Zacks Consensus Estimate for current-year earnings has improved 14.1% over the past 60 days. The company has a Zacks Rank #2.

TRI Pointe Group, Inc. (TPH - Free Report) is involved in the design, construction and sale of single-family homes. The company's operating portfolio includes Maracay Homes in Arizona; Pardee Homes in California and Nevada; Quadrant Homes in Washington; Trendmaker Homes in Texas; TRI Pointe Homes in California and Colorado; and Winchester Homes in Maryland and Virginia.

The company’s expected earnings growth rate for the current year is 18.4%. The Zacks Consensus Estimate for current-year earnings has improved 2.8% over the past 60 days. TRI Pointe has a Zacks Rank #2.

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 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 34.8%. The Zacks Consensus Estimate for current-year earnings has improved 20.3% over the past 60 days. The company carries a Zacks Rank #2.

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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