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Pending Home Sales Jump in March: 5 Solid Stocks to Buy

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Pending home sales, which mean the number of houses going under contract, increased in March despite rising home prices. Interestingly, even rising mortgage rates since the beginning of the year have not dampened the sales figure.

Demand continues to rise for homes despite a shortage in supply. The pandemic saw most major industries taking a hit. However, the homebuilding market has been on a tear ever since the economy reopened and momentum hasn’t slowed since.

Pending Home Sales Rise

The National Association of Realtors said on Apr 30 that pending home sales rose 1.9% in March although rising prices have been hurting buyers. On a year-over-year basis, pending home sales grew 23.3%. However, this jump looks huge given that the housing market came to a standstill last year in March and April, the time when the pandemic had struck.

Regionally, pending home sales jumped the most (6.1%) in the Northeast followed by the South (2.9%) on a month-over-month basis.

Homebuilding Market Soaring

The housing market took a hit in April and May last year when the government had 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.

The pandemic compelled many to leave big cities and settle in smaller towns that helped drive home sales. Moreover, with the vaccination drive in full swing and stimulus checks reaching people, many seem to be more confident and showing faith in the economy.

Mortgage rates are rising but are still quite low and luring people to the markets. This has seen housing starts jump in March. The U.S. Census Bureau and the U.S. Department of Housing and Urban Development jointly reported earlier last month that housing starts jumped 19.4% in March to a seasonally adjusted annual rate of 1.739 million units.

Also, building permits increased 2.7% in March after an 8.8% decline in February. Moreover, analysts predict existing home sales to jump 10% in 2021 to 6.2 million, which shows the strength in the industry.

Our Choices

The rise in pending and new home sales along with growth in homebuilding activity proves the continuing boom in the homebuilding market. This thus makes for an opportune time to invest in homebuilding stocks.

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 47.1%. The Zacks Consensus Estimate for current-year earnings has improved 24.5% over the past 60 days.  PulteGroup has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank 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 53.2%. The Zacks Consensus Estimate for current-year earnings has improved 14.5% over the past 60 days. Century Communities sports a Zacks Rank #1.

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 81.5%. The Zacks Consensus Estimate for current-year earnings has improved 11.2% over the past 60 days.  The company carries a Zacks Rank #2 (Buy).

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 39.9%. The Zacks Consensus Estimate for current-year earnings has improved 20.1% over the past 60 days. The company carries a Zacks Rank #2.

NVR, Inc. (NVR - Free Report) is engaged in the construction and sale of single-family detached homes, townhomes and condominium buildings, all of which are primarily constructed on a pre-sold basis.

The company’s expected earnings growth rate for the current year is 41.6%. The Zacks Consensus Estimate for current-year earnings has improved 7.7% over the past 60 days. The company has a Zacks Rank #2.

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