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Homebuilding Market Poised for a 2024 Rebound: 4 Stocks to Watch
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The homebuilding industry has been one of the worst sufferers of the Federal Reserve’s aggressive interest rate hike policy. While demand remains high, higher mortgage rates have discouraged buyers from investing in new homes.
However, the homebuilding market appears to be bouncing back, as the Federal Reserve indicated at ending its monetary tightening campaign after inflation declined sharply over the past year.
Hopes of rate cuts in 2024 have been giving homebuilders their lost confidence back. Also, single-family homebuilding surged in November as mortgage rates have started falling.
Homebuilder Confidence Rebounds
The National Association of Homebuilders/Wells Fargo Index reading showed that homebuilder confidence bounced back to 37 in December from 34 in November, higher than the consensus estimate of 36.
Also, housing starts jumped in November. Single-family housing starts that account for the majority of the homebuilding in the nation rose a solid 18% to a seasonally adjusted annual rate of 1.143 million in November.
Housing permits for single-family homes jumped 0.7% in November to a seasonally adjusted annual rate of 976,000 units.
Although the confidence level among homebuilders is still low, it is gradually trying to rebound on easing interest rates, which is likely to bolster sales in the near term. Homebuilders have struggled to attract buyers over the past couple of years.
The Federal Reserve’s monetary tightening campaign to curb 40-year-high inflation saw it increasing interest rates from 0-0.25% in March 2022 to the present rate of 5.25-5.50%. This pushed the 30-year fixed mortgage rate to nearly 8% over the past year, leaving buyers struggling to purchase new property.
However, the Federal Reserve’s aggressive rate hike policy has been bearing fruit, with inflation now a lot lower from its peak of 9.1% in June 2022. The Fed left interest rates unchanged for the third straight time in its December policy meeting and hinted at ending its monetary tightening campaign soon.
The 30-year fixed mortgage rate averaged 6.95% last week, a lot lower than the 23-year high of 7.79% in late October.
Also, the Federal Reserve has said that it doesn’t plan to keep interest rates high for a longer period and expectation is high that the central bank may go for three 25-basis point rate cuts in 2024, which is further going to bring down mortgage rates and help homebuilders.
Stocks in Focus
Given the promising outlook, it would be ideal to track homebuilding stocks like Dream Finders Homes, Inc. (DFH - Free Report) , Lennar Corporation (LEN - Free Report) , D.R. Horton, Inc. (DHI - Free Report) and Toll Brothers Inc. (TOL - Free Report) .
Dream Finders Homes, Inc. is a homebuilding company that operates principally in Florida, Texas, North Carolina, South Carolina, Georgia, Colorado, Virginia and Maryland. DFH is based in Jacksonville, FL.
Dream Finders Homes has an expected earnings growth rate of 12% for next year. The Zacks Consensus Estimate for current-year earnings has improved 9.6% over the last 60 days. DFH presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Lennar Corporation is engaged in homebuilding and financial services in the United States. LEN’s reportable segments consist of Homebuilding, Lennar Financial Services, Rialto and Lennar Multifamily.
Lennar Corporation’s expected earnings growth rate for next year is 8.5%. The Zacks Consensus Estimate for current-year earnings has improved 1.2% over the past 60 days. LEN presently carries a Zacks Rank #2 (Buy).
D.R. Horton, Inc. is one of the leading national homebuilders, primarily engaged in the construction and sale of single-family houses both in the entry-level and move-up markets. DHI’s operations are spread across 11 markets in 33 states in the East, Midwest, Southeast, South Central, Southwest and West regions of the United States.
D.R. Horton has an expected earnings growth rate of 7.4% for next year. The Zacks Consensus Estimate for current-year earnings has improved 1.1% over the last 30 days. DHI presently carries a Zacks Rank #3 (Hold).
Toll Brothers Inc. 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. TOL operates in Arizona, California, Florida, Delaware, Maryland, Pennsylvania, and South Carolina. Toll Brothers offers homes under two segments, namely Traditional Home Building Product and City Living.
Toll Brothers’ expected earnings growth rate for the current year is 2.7%. The Zacks Consensus Estimate for current-year earnings improved 1.7% over the past 60 days. Toll Brothers presently has a Zacks Rank #3.
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Homebuilding Market Poised for a 2024 Rebound: 4 Stocks to Watch
The homebuilding industry has been one of the worst sufferers of the Federal Reserve’s aggressive interest rate hike policy. While demand remains high, higher mortgage rates have discouraged buyers from investing in new homes.
However, the homebuilding market appears to be bouncing back, as the Federal Reserve indicated at ending its monetary tightening campaign after inflation declined sharply over the past year.
Hopes of rate cuts in 2024 have been giving homebuilders their lost confidence back. Also, single-family homebuilding surged in November as mortgage rates have started falling.
Homebuilder Confidence Rebounds
The National Association of Homebuilders/Wells Fargo Index reading showed that homebuilder confidence bounced back to 37 in December from 34 in November, higher than the consensus estimate of 36.
Also, housing starts jumped in November. Single-family housing starts that account for the majority of the homebuilding in the nation rose a solid 18% to a seasonally adjusted annual rate of 1.143 million in November.
Housing permits for single-family homes jumped 0.7% in November to a seasonally adjusted annual rate of 976,000 units.
Although the confidence level among homebuilders is still low, it is gradually trying to rebound on easing interest rates, which is likely to bolster sales in the near term. Homebuilders have struggled to attract buyers over the past couple of years.
The Federal Reserve’s monetary tightening campaign to curb 40-year-high inflation saw it increasing interest rates from 0-0.25% in March 2022 to the present rate of 5.25-5.50%. This pushed the 30-year fixed mortgage rate to nearly 8% over the past year, leaving buyers struggling to purchase new property.
However, the Federal Reserve’s aggressive rate hike policy has been bearing fruit, with inflation now a lot lower from its peak of 9.1% in June 2022. The Fed left interest rates unchanged for the third straight time in its December policy meeting and hinted at ending its monetary tightening campaign soon.
The 30-year fixed mortgage rate averaged 6.95% last week, a lot lower than the 23-year high of 7.79% in late October.
Also, the Federal Reserve has said that it doesn’t plan to keep interest rates high for a longer period and expectation is high that the central bank may go for three 25-basis point rate cuts in 2024, which is further going to bring down mortgage rates and help homebuilders.
Stocks in Focus
Given the promising outlook, it would be ideal to track homebuilding stocks like Dream Finders Homes, Inc. (DFH - Free Report) , Lennar Corporation (LEN - Free Report) , D.R. Horton, Inc. (DHI - Free Report) and Toll Brothers Inc. (TOL - Free Report) .
Dream Finders Homes, Inc. is a homebuilding company that operates principally in Florida, Texas, North Carolina, South Carolina, Georgia, Colorado, Virginia and Maryland. DFH is based in Jacksonville, FL.
Dream Finders Homes has an expected earnings growth rate of 12% for next year. The Zacks Consensus Estimate for current-year earnings has improved 9.6% over the last 60 days. DFH presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Lennar Corporation is engaged in homebuilding and financial services in the United States. LEN’s reportable segments consist of Homebuilding, Lennar Financial Services, Rialto and Lennar Multifamily.
Lennar Corporation’s expected earnings growth rate for next year is 8.5%. The Zacks Consensus Estimate for current-year earnings has improved 1.2% over the past 60 days. LEN presently carries a Zacks Rank #2 (Buy).
D.R. Horton, Inc. is one of the leading national homebuilders, primarily engaged in the construction and sale of single-family houses both in the entry-level and move-up markets. DHI’s operations are spread across 11 markets in 33 states in the East, Midwest, Southeast, South Central, Southwest and West regions of the United States.
D.R. Horton has an expected earnings growth rate of 7.4% for next year. The Zacks Consensus Estimate for current-year earnings has improved 1.1% over the last 30 days. DHI presently carries a Zacks Rank #3 (Hold).
Toll Brothers Inc. 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. TOL operates in Arizona, California, Florida, Delaware, Maryland, Pennsylvania, and South Carolina. Toll Brothers offers homes under two segments, namely Traditional Home Building Product and City Living.
Toll Brothers’ expected earnings growth rate for the current year is 2.7%. The Zacks Consensus Estimate for current-year earnings improved 1.7% over the past 60 days. Toll Brothers presently has a Zacks Rank #3.