The homebuilding market seems to be rebounding after slowing down slightly over the past couple of months. According to the latest data from Commerce Department, housing starts rose in May, indicating that despite skyrocketing lumber prices, people are interested in buying homes.
The housing market has been doing well ever since the economy reopened last year, following the coronavirus-induced lockdown. This made 2020 a great year for the housing market, and after a surprising decline in April, housing starts have once again bounced back.
Housing Starts Rise in May
The Commerce Department said on Jun 16 that housing starts rose 3.6% year over year in May to a seasonally adjusted annual rate of 1.572 million units. Although it missed analysts’ expectations of 1.630 units, the figure indicates growing demand for new homes.
Also, April’s figures were revised down to 1.517 million units from the earlier reported 1.569 units. Although April saw a decline, March’s 1.733 million units were the best since June 2006. The jump comes despite softwood lumber prices increasing a record 154.3% in May on a year-over-year basis. However, this proves that despite skyrocketing prices, demand for new homes continues to be on the rise.
Homebuilding Market Poised to Grow
The homebuilding market has been on a tear for over a year now. Record-low mortgage rates last year saw buyers flocking to buy new homes. Besides, the pandemic compelled many to leave crowded cities and go to thinly populated areas to maintain social distancing, spurring demand for new homes.
In fact, the homebuilding market has also been driving the construction sector. Earlier this month, the Commerce Department said that the homebuilding industry has been driving overall construction spending and supporting the economy. In April, construction spending increased 0.2% driven by increased spending on private projects such as new single-family homes. Spending on private projects grew 0.4%.
Demand for single-family homes continues to be high despite rising lumber prices and labor costs. Outlays on residential projects rose 1% in April.
Although sales of new single-family homes declined, the homebuilding sector is witnessing robust demand despite rising labor costs and lumber prices. Thus, the housing sector is set to benefit in the coming months too.
Demand for new homes in the United States has been on the rise owing to record-low mortgage rates and despite rising lumber prices. A jump in housing starts indicates that the homebuilding market is still going strong. This thus makes for the right opportunity to invest in homebuilding stocks. Each of the stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a
VGM Score of A or B. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Toll Brothers Inc. ( TOL Quick Quote TOL - Free Report) builds single-family detached and attached home communities; master-planned luxury residential resort-style golf communities; and urban low, mid, and high-rise communities, principally on the land it develops and improves.
The company’s expected earnings growth rate for the current year is 68.8%. The Zacks Consensus Estimate for current-year earnings has improved 8.7% over the past 30 days. The company sports a Zacks Rank #1 and has a VGM Score of B.
Taylor Morrison Home Corporation ( TMHC Quick Quote TMHC - Free Report) is a homebuilder and land developer engaged in building single-family detached and attached homes for first-time buyers, move-up families as well as luxury and active adult customers.
The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 5.3% over the past 60 days. The company has a Zacks Rank #2 and VGM Score of B.
TRI Pointe Group, Inc. ( TPH Quick Quote 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 44.7%. The Zacks Consensus Estimate for current-year earnings has improved 18.9% over the past 60 days. TRI Pointe has a Zacks Rank #2 and VGM Score of B.
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 58.7%. The Zacks Consensus Estimate for current-year earnings has improved 36.4% over the past 60 days. The company has a Zacks Rank #1 and VGM Score of A.
MI Homes, Inc. ( MHO Quick Quote MHO - Free Report) is one of the nation's leading builders of single-family homes. It serves a broad segment of the housing market, including first-time, move-up, luxury and empty-nester buyers.
The company’s expected earnings growth rate for the current year is 23.3%. The Zacks Consensus Estimate for current-year earnings has improved 42.4% over the past 60 days. The company has a Zacks Rank #1 and VGM Score of B.
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