Back to top

Image: Bigstock

Millennial Homebuyers to Fuel US Housing Market: 5 Top Picks

Read MoreHide Full Article

The U.S. housing market emerged as a dark horse in the coronavirus-led economic downturn. As the storm cleared out cities and drove people to live in suburbs and lesser populated areas, the housing market boomed. A combination of massive migration with low mortgage rates made homes sell like hotcakes. While demand for homes continues to rise, the supply side faces hurdles from lumber shortage making homes pricey.

Despite the cons, the housing market boom is not likely to slow down any time soon, thanks to millennial homebuyers. Remote working practices will continue post-pandemic and this makes millennials buy homes in suburbs and rural areas. Apartment, townhouse or condo have limited space and are costly in major cities of America. This age group, which is into planning for the future, is willing to splurge on quality space and is highly inclined toward do-it-yourself (DIY) activities. Hence, homebuilders and home improvement companies stand in good stead.

Millennials Changing Housing Market Scenario

Millennials in their late 20s and early 30s have a higher homeownership rate, have a well-established career, paid off student loan debt and are moving out of their parent’s residences. Now, with money to spend and time to make a decision for the future, this age group is also changing the housing market scenario. For instance, millennials are more inclined toward technology and sustainability.

Preferring to live in the suburbs, this age group opts for smart homes, with better security and technological aids. In fact, the pandemic has accelerated the need for technology and millennials are willing to pay more for touchless capabilities or controlled access from smartphones and other personal devices. Millennial homebuyers are looking for video entry systems and security, mobile and biometric access controls to lighting and heat controls to smart-enabled speaker systems, and package tracking systems in their homes. Artificial intelligence (AI) is being used to give people more convenience, like adjusting indoor climate, window shades, and lighting features without user action.

Along with that, millennials are focused on reducing carbon footprints and making optimal utilization of space. Hence, these new homes need to have load-balancing EV charging stations and sustainable energy like solar plants. They also require access to quality building-wide gigabit Wi-Fi to continue working from home.

Millennials played a huge role in fueling the housing market boom last year. However, it was not enough to close the generation gap with the boomers. Per an Apartment List report, the millennial homeownership rate stands at 47.9% in 2020, compared with generation X’s rate of 69.1% and way lower than baby boomers’ rate of 78.8%. Now, while the pandemic has reduced affordability due to job crunch, it has also lowered mortgage rates. Hence, millennials may now be struggling to catch up and reduce the generational gap but it will achieve it soon. This in turn will keep the housing space booming.

Upbeat Housing Data Point at Northward Trend

In March, the housing market had shown a northward trend and builders have been optimistic of growth despite the supply-side strains. The National Association of Home Builders’ (NAHB) survey showed that confidence among homebuilders increased to 83 in April amid strong buyer traffic. The 30-year mortgage rate has slipped below the record low of 3% again. According to Freddie Mac data,  the 30-year fixed mortgage rate came in at 2.98% for the week ending Apr 29.

Other housing data like building permits and housing starts have also sustained growth in March. The U.S. Census Bureau and the U.S. Department of Housing and Urban Development jointly reported that housing starts jumped 19.4% in March from the previous month. In the same report, released on Apr 16, building permits came in at 1.766 million in March, with single-family permits jumping 4.6% for the month.

5 Solid Stock Picks

The millennials will continue to fuel the housing market and despite the supply side strains, the industry will continue to boom. Given such positives, we have shortlisted five housing stocks that are poised to grow. All the stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Beazer Homes USA, Inc. (BZH - Free Report) operates as a homebuilder that designs, constructs, and sells single-family and multi-family homes under the Beazer Homes, Gatherings, and Choice Plans names. The company's expected earnings growth rate for the current year is 58.7% compared with the Zacks Building Products - Home Builders industry’s projected earnings growth of 26.8%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 36.4% upward over the past 60 days.

Weyerhaeuser Company (WY - Free Report) grows and harvests trees for wood and building products. The company's expected earnings growth rate for the current year is 96.9% compared with the Zacks Building Products - Wood industry’s projected earnings growth of 26.1%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 40.3% upward over the past 60 days.

Owens Corning (OC - Free Report) manufactures and markets a range of insulation, roofing, and fiberglass composite materials. The company's expected earnings growth rate for the current year is 46.1% compared with the Zacks Building Products - Miscellaneous industry’s projected earnings growth of 14%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 16.9% upward over the past 60 days.

Century Communities, Inc. (CCS - Free Report) engages in the design, development, construction, marketing, and sale of single-family attached and detached homes. The company that belongs to the Zacks Building Products - Home Builders industry has an expected earnings growth rate of 88.6% for the current year. The Zacks Consensus Estimate for the company’s current-year earnings has been revised nearly 41% upward over the past 60 days. 

PulteGroup, Inc. (PHM - Free Report) acquires and develops land, primarily for residential purposes and constructs single-family detached, townhouses, condominiums, and duplexes on such land. The company that belongs to the Zacks Building Products - Home Builders industry has an expected earnings growth rate of 47.1% for the current year. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 24.5% upward over the past 60 days.

Infrastructure Stock Boom to Sweep America

A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.

The only question is “Will you get into the right stocks early when their growth potential is greatest?”

Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.

Download FREE: How to Profit from Trillions on Spending for Infrastructure >>