M.D.C. Holdings, Inc. ( MDC Quick Quote MDC - Free Report) has been rallying this year, thanks to improving demand trends and a lack of housing supply. The stock grew 45.3% in the year-to-date period compared with the Zacks Building Products - Home Builders industry’s 39.8% growth. Reduced supply chain issues and reduced cycle times are also likely to aid the homebuilding industry in the near term. However, a more than 7% 30-year fixed-rate mortgage, elevated construction and financing costs and a lack of skilled labor are major concerns. Image Source: Zacks Investment Research MDC and its peers like KB Home ( KBH Quick Quote KBH - Free Report) , D.R. Horton, Inc. ( DHI Quick Quote DHI - Free Report) and Lennar Corporation ( LEN Quick Quote LEN - Free Report) have undertaken various price actions as well as cost-saving moves that will certainly add to the bliss. MDC currently sports a Zacks Rank #1 (Strong Buy) with an impressive VGM Score of A. This helps identify stocks with the most attractive value, growth and momentum. What Makes MDC A Profitable Pick? Built-to-Order Process Bode Well: The company’s Build-to-Order process, also known as “dirt sales,” provides buyers with a wide range of choices in major aspects of their future home and a personalized customer experience through in-house community teams. This highly consumer-centric approach helps homebuyers design a home with the features and amenities of their choice, with the flexibility to customize their options according to their preferences and affordability. The company limits the number of homes started without a contract, also known as “spec homes” and follows a strategy of initiating construction only after a purchase agreement has been executed. This reduces inventory risk, enhances efficiencies in construction and provides greater visibility as well as predictability for future deliveries. MDC’s build-to-order homes model gives it a competitive edge over its peers. Focus on Affordability: MDC remains focused on the growing demand for entry-level homes, addressing the need for lower-priced homes, given affordability concerns prevailing in the U.S. housing market. The company has been reaping benefits from the successful execution of strategic initiatives to boost profitability, with a focus on entry-level homes. In view of these strategic efforts, the growing share of first-time buyers is encouraging, especially post-pandemic. Improving Housing Trends: The Housing market has shown signs of recovery of late. This is reflected in the company’s order pattern. Net new orders grew 54.3% year over year to 2,167 units in the second quarter. This was driven by an increase in the monthly sales absorption pace, which was backed by the high pace of gross orders as well as a decrease in cancellation rates. Cancellations, as a percentage of gross sales, decreased year over year to 20.2% from 37.2%. The monthly absorption rate also increased by 34% year over year. The value of net orders increased 36.8% from the year-ago quarter’s levels to $1.21 billion, backed by the increase in net new orders. The uptrend in the new home market is driven by reduced existing home supply. A Brief Discussion of the Above-Mentioned Stocks D.R. Horton now expects consolidated revenues for fiscal 2023 to be in the range of $34.7-$35.1 billion, up from the prior expectation of $31.5-$33 billion. DHI reported $33.5 billion in revenues in fiscal 2022. Homes closed are anticipated within 82,800-83,300 units versus 77,000-80,000 units expected earlier. For the Rental business, the company expects homes closed within 6,500-7,000 units versus prior guidance of 4,000-5,000 units. Fiscal 2023 cash flow from homebuilding operations on a consolidated basis is expected to be more than $3 billion. DHI’s fiscal 2023 earnings per share have increased to $13.07 per share from $11.28 over the past 30 days, respectively. It carries an impressive VGM Score of A. It currently carries a Zacks Rank #3 (Hold). NVR’s new orders grew 26.6% in the second quarter of 2023 from the year-ago quarter and cancellation rates declined to 11% from 14% a year ago. The shortage of existing homes for sale in the market has been driving demand for new homes despite rate-hike challenges. Also, a high ROE and a solid liquidity position add to the tailwinds. NVR presently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. The Zacks Consensus Estimate for its 2023 earnings has been revised upward to $440.88 per share from $408.99 over the past 30 days. Based in Los Angeles, KB Home has been gaining from prudent growth plans, a solid existing geographic footprint and a built-to-order approach. KBH currently sports a Zacks Rank #1. The Zacks Consensus Estimate for fiscal 2023 earnings of $6.29 per share has increased from $5.50 over the past 60 days.