Back to top

Image: Bigstock

5 Stocks to Buy on Unstoppable Housing Market Growth

Read MoreHide Full Article

U.S. existing home sales grew for the second straight month in July after slowing down a bit at the beginning of the year. One of the major reasons behind this rise is that prices eased somewhat after hitting a record high last month.

Rising prices and low inventory have been concerns for the homebuilding market lately but that hasn’t stopped people from hunting for new homes. This once again shows that the underlying strength in the housing market.

Existing Home Sales Grow in July

The National Association of Realtors said on Aug 23 that existing home sales rose 2% in July to a seasonally adjusted annual rate of 5.99 million units. On a year-over-year basis, sales grew 1.5% from the year-ago figure of 5.9 million units.

Home re-sales account for the majority of U.S. home sales and once again prove that demand is high despite rising prices. However, a decline in price was somewhat responsible for July’s uptick. Existing home sales rebounded in June after four straight months of decline.

The median sales price declined to $359,900 in July after hitting a record high in June. However, it was still 17.8% higher than a year ago. In July, sales increased in the Midwest, South and the West but remained unchanged in the Northeast.

Home Market Going Strong

The home market was somewhat cooling down after a robust 2020 on rising prices and a low inventory in the homebuilding market. However, it seems that the market is bouncing back with a slight fall in prices.

The supply chain was already tight before the pandemic, which pushed up the cost of lumber and concrete. During the pandemic, demand for homes skyrocketed as a huge number of people rushed to buy homes in less-populated areas to avoid contracting the deadly coronavirus.

Also, many started looking for bigger homes during the pandemic as they needed more space to work and learn remotely. This sent the homebuilding market on a tear.

Our Choice

The homebuilding market is still going strong despite rising prices amid high demand for homes. 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 the current year is 99.4%. The Zacks Consensus Estimate for current-year earnings improved 9.5% 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.

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 66.8%. The Zacks Consensus Estimate for current-year earnings improved 15.3% over the past 60 days. TRI Pointe has a Zacks Rank #2.

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 more than 100%. The Zacks Consensus Estimate for current-year earnings improved 10.9% over the past 60 days. Its shares have gained 17.8% year to date. Century Communities carries a Zacks Rank #2.

MI Homes, Inc. (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 63.3%. The Zacks Consensus Estimate for current-year earnings improved 32.5% over the past 60 days. 

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 51.3%. The Zacks Consensus Estimate for current-year earnings improved 5.5% over the past 60 days. The company sports a Zacks Rank #1.