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6 Solid Stocks to Buy in a Booming Homebuilding Market

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The U.S. homebuilding market has been doing quite well for some time and the dream run continues despite worries of rising labor and raw material costs. Increasing demand for both new and existing homes has acted as a catalyst for the surge in sales.

This has, at the same time,given a boost to homebuilder sentiment. Overall, the homebuilding market is poised to grow in the coming days. The surging demand for homes is benefitting its ancillary industries too.

New Home Sales Jump in September

The Commerce Department said on Oct 26 that sales of new single-family homes rose 14% to a seasonally adjusted annual rate of 800,000 units in September. This is the highest level attained since March. Analysts had expected new home sales to rise to 760,000 units.

August sales were revised down to 702,000 units from the initially reported 740,000 units. September sales increased in almost all parts, including South, West and Northeast.

The jump in September comes despite builders struggling to cope with rising costs and supply shortages of raw materials like copper and steel. At the same time, lumber prices are soaring and labor is getting scarce, pushing up new home prices. However, surging demand has been driving sales.

Homebuilding Market Poised to Grow

The upbeat sentiment in the homebuilding market has continued since June last year after the economy reopened following the coronavirus-induced lockdown. Although the market slowed down earlier this year on rising raw material prices and labor costs, and higher interest rates, demand for new single-family homes has increased.

It can be said that the overall U.S. homebuilding market is once again thriving after a slight slowdown. Hitting an eight-month high, existing home sales rose 7% from August to a seasonally adjusted 6.29 million units in September, according to the National Association of Realtors (NAR). 

The jump in both new and existing home sales has resulted in bullish sentiment among homebuilders. As a result, homebuilder confidence rose 4 points to a reading of 80 in October from September’s reading of 76, according to the National Association of Home Builders/Wells Fargo Housing Market Index.

There were already fewer homes compared to the high demand before the pandemic, and now the gap has widened. This is further helping to boost home prices and the trend is likely to continue in the days to come.

Our Choices

New and existing homes sales hitting new highs in September along with homebuilder sentiment getting a boost in October is an indication that buyers are showing interest as the economy continues to reopen. This is thus an opportune time to invest in homebuilding and other ancillary stocks that are likely to benefit from the boom in the housing market.

Toll Brothers Inc. (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 80%. The Zacks Consensus Estimate for current-year earnings improved 9% over the past 60 days.  Toll Brothers has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Dream Finders Homes, Inc. (DFH - Free Report) is into homebuilding business in the United States. The company builds, designs and sells single-family homes in Jacksonville, Orlando, Denver, the Washington D.C. metropolitan area, and Austin, as well as in Charlotte and Raleigh. 

The company’s expected earnings growth rate for next year is 26.3%. The Zacks Consensus Estimate for current-year earnings improved 2.9% over the past 60 days. Dream Finders sports a Zacks Rank #1.

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 80.2%. The Zacks Consensus Estimate for current-year earnings improved 8% over the past 60 days. TRI Pointe has a Zacks Rank #1.

CRH PLC (CRH - Free Report) manufactures cement, concrete products, aggregates, roofing, instulation and other building materials.

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 2.7% over the past 60 days.  CRH Plc has a Zacks Rank #2 (Buy).

TopBuild Corp. (BLD - Free Report) is an installer and distributor of insulation and other building products to the U.S. construction industry. TopBuild, which earlier operated as a subsidiary of Masco Corporation, provides insulation and building material services across the nation through TruTeam and Service Partners.

The company’s expected earnings growth rate for the current year is 47.5%. The Zacks Consensus Estimate for current-year earnings improved 2.5% over the past 60 days.  CRH Plc has a Zacks Rank #2.

Acuity Brands Inc (AYI - Free Report) is the parent company of Acuity Brands Lighting, Inc. and other subsidiaries. The company manufactures and distributes lighting fixtures and related components that comprise devices such as luminaires, lighting controls, and controllers for various building systems, power supplies, prismatic skylights, and drivers.It also offers integrated systems designed to optimize energy efficiency and comfort for various indoor and outdoor applications.

The company’s expected earnings growth rate for the current year is 9.3%. The Zacks Consensus Estimate for current-year earningsimproved 6.9% over the past 60 days.  Beacon Roofinghas a Zacks Rank #2.

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