The U.S. homebuilding market was on a high last year and the trend continues. New home sales increased for the second straight month in January 2021, the Commerce Department said on Feb 24.
The news comes just days after the National Association of Realtors said that existing home sales jumped 0.6% in January. While new homes have been enjoying high demand, prices too are skyrocketing. Moreover, a low mortgage rate is helping the homebuilding industry and the scene is likely to stay so in the coming months too.
New Home Sales Rise in January
The Commerce Department reported that new home sales increased 4.3% month over monthto a seasonally adjusted annual rate of 923,000 units in January. This is the second straight month of increase. In December, new home sales jumped 5.5% month over monthto a revised rate of 885,000 units. On a year-over-year basis, new home sales jumped 19.3% in January.
The median new house price jumped 5.3% to $346,400 on a year-over-year basis in January. The homebuilding market has been doing well ever since the economy reopened. The January sales were driven by higher sales in the Midwest and West. New home sales increased 12.6% to an annual rate of 107,000 in the Midwest, while it jumped 6.8% in the West to an annual rate of 307,000.
Low Mortgage Rate, Other Factors Helping Homebuilding Market
The jump in new home sales comes just days after the National Association of Realtors said that existing home sales increased 0.6% month over month in January to a seasonally adjusted annual rate of 6.69 million units after increasing 0.9% month over monthin December to 6.65 million units. Record low mortgage rates are making buyers flock to the markets, which has been helping the homebuilding market. And the rates are likely to stay low for some time.
Understandably, people don’t want to let go of this opportunity and are rushing to buy homes. This at the same time is also resulting in a supply crunch, which is pushing up home prices. Interestingly, the rise comes despite a decline in housing starts in January, albeit after a gap of five months.
Also, the pandemic saw many leave big cities and shift to smaller towns and suburbs that helped sales of homes. There were already fewer homes to meet demand before the pandemic, and now fewer homeowners are willing to list their homes for sale, which is further helping home prices.
A record-low mortgage rate coupled with a jump in consumer confidence in January is likely to help the homebuilding market in the near term. This thus makes for an opportune time to invest in homebuilding stocks.
KB Home ( KBH Quick Quote 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 #1 (Strong Buy). You can see
the complete list of today’s Zacks #1 Rank stocks here. Century Communities, Inc. ( CCS Quick Quote 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.
Beazer Homes USA, Inc. ( BZH Quick Quote BZH - Free Report) designs, builds and sells single-family homes. The company designs homes to appeal primarily to entry-level and first move-up home buyers.
The company’s expected earnings growth rate for the current year is 16.4%. The Zacks Consensus Estimate for current-year earnings has improved 46.6% over the past 60 days. The company has a Zacks Rank #1.
D.R. Horton, Inc. ( DHI Quick Quote 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 (Buy).
M.D.C. Holdings, Inc. ( MDC Quick Quote 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.
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