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Millennial Buyers Continue to Boost Home Sales: 5 Top Picks

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While the pandemic has been fatal for some industries, the housing sector has witnessed a boom in this period and still has momentum. Americans splurged on buying and renovating homes in an attempt to avoid crowded neighborhoods. Additionally, a generational shift in home buying has begun with millennials beginning to purchase homes.

Millennials, in their late 20s and early 30s, are leading the charge in homeownership. According to a Fannie Mae’s survey, the millennial move to the suburbs has been a major story of the past year and the pandemic has only accelerated this trend. Millennials’ lookout for affordability has been pushing them away from cities toward suburban homes that are spacious enough for raising kids and having a secluded working space. Moreover, with businesses shifting their operations to smaller regional centers, the scope of getting hired is high.

The pandemic has shown that millennials are willing to buy homes and renovate them on their own to match personal tastes and needs. Hence, millennials are taking up DIY projects to renovate and personalize mid-century ranch houses or farmhouses, converting them into their humble adobe. Many begin with the basics, like painting and gardening, and move on to remodeling projects for kitchens, bathrooms, decks, and home offices.

Per the National Association of Homebuilders’ survey report, the current market for large remodeling projects has gone up to 90 in the second quarter of 2021 compared with 70 in the same quarter last year. This in turn has led to a strong appreciation of the value of existing homes.

Existing Home Sales Bump Up in July

Per the National Association of Realtors’ report on Aug 23, existing-home sales rose 2% to 5.99 million houses sold in July, with no decline in sales in any region. These two consecutive monthly increases came with June’s sales being revised slightly upward to 5.87 million existing homes sold.

Existing single-family homes, townhomes, condominiums, and co-ops sales grew 2% last month, with first-time buyers accounting for 30% of sales. Additionally, total housing inventory at the end of July totaled 1.32 million units, or up 7.3% from June's supply. The Northeast witnessed steady growth, a 12.1% rise, followed by Midwest that rose 3.8%, West grew 3.3% and South registered a 1.2% rise in existing home sales.

Mortgage Rate Still Below 3%

While supply-side constraints continue to bump up home prices, there are still too few starter homes available. However, the historically-low mortgage rate continues to support homebuyers. The 30-year, conventional, fixed-rate mortgage averaged 2.87% in July, per Freddie Mac. For the week ending Aug 19, the 30-year mortgage rate stood at 2.86%.

5 Top Choices

The rush to suburbia continues to boost demand for the housing industry, accompanied by millennials’ home buying spree. Though dearth of supplies keeps prices high, the historically-low mortgage rate pushes homebuyers to pick safe shelters beyond jam-packed cities. Thus, we have shortlisted five housing stocks that belong to the Zacks Building Products - Home Builders industry and are poised to grow.

M/I Homes, Inc. (MHO - Free Report) is a single-family homes builder. The company caters to first-timer, millennials, move-up, empty-nester, and luxury buyers under the M/I Homes brand name. The Zacks Consensus Estimate for M/I Homes’ current-year earnings has been revised 32.5% upward over the past 60 days.  

The company’s expected earnings growth rate for the current year is 63.3% and flaunts 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) engages in the design, development, construction, marketing, and sale of single-family attached and detached homes. The Zacks Consensus Estimate for Century Communities’ current-year earnings has been revised nearly 18% upward over the past 60 days. The company’s expected earnings growth rate for the current year is more than 100% and has a Zacks Rank #2 (Buy).

KB Home (KBH - Free Report) operates as a homebuilding company. This Zacks Rank #2 company offers attached and detached single-family residential homes, townhomes, and condominiums primarily for first-time, first move-up, second move-up, and active adult homebuyers.

The Zacks Consensus Estimate for KB Home’s current-year earnings has been revised 9.5% upward over the past 60 days. The company’s expected earnings growth rate for the current year is 99.4%.

NVR, Inc. (NVR - Free Report) constructs and sells single-family detached homes, townhomes, and condominium buildings under the Ryan Homes, NVHomes, and Heartland Homes names. Its Ryan Homes products are designed for first-time and first-time move-up buyers. The Zacks Consensus Estimate for NVR’s current-year earnings has been revised 8.7% upward over the past 60 days. This Zacks Rank #2 company’s expected earnings growth rate for the current year is 51.3%.

Tri Pointe Homes, Inc. (TPH - Free Report) , a Zacks Rank #2 company, engages in the design, construction, and sale of single-family attached and detached homes. The Zacks Consensus Estimate for Tri Pointe Homes’ current-year earnings has been revised 15.3% upward over the past 60 days. The company’s expected earnings growth rate for the current year is 66.8%.