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Builder Sentiment Gains as Rates Fall: 5 Top Housing Picks
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Builder confidence in the market for newly constructed single-family homes rose in January, marking the second consecutive monthly gain. The recent decline in rates has bolstered housing affordability, leading to a resurgence of buyers who were discouraged in the fall due to elevated borrowing costs.
Key Takeaways
Builder confidence in newly built single-family homes rose by seven points in January to reach a level of 44, as reported by the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).
Mortgage rates consistently below 7% in the last month have significantly bolstered builder confidence as the new year begins. As of Jan 11, 2024, mortgage rates have shown minimal movement over the past three weeks, maintaining a range in the mid-6%, contributing to a modest increase in homebuyer demand. The 30-year fixed mortgage rate is 6.66% for the week ending Jan 11, 2024, according to data from Freddie Mac.
Since late October 2023, mortgage rates have decreased by more than 110 basis points, according to Freddie Mac. This positive trend has shifted the future sales expectation component in the HMI into positive territory for the first time since August.
Notably, all three major HMI indices posted gains in January. The HMI index assessing current sales conditions rose by seven points to 48, the component measuring sales expectations in the next six months increased 12 points to 57, and the component evaluating the traffic of prospective buyers grew by five points to 29.
Analyzing the three-month moving averages for regional HMI scores, the Northeast saw a four-point increase to 55, the South experienced a two-point increase to 41, the West recorded a one-point gain to 32, and the Midwest remained steady at 34.
Importantly, despite the decline in mortgage rates to below 7% in the past month, many builders are still opting to reduce home prices to stimulate sales. In January, 31% of builders reported price reductions, a decrease from 36% in the previous two months and the lowest rate since last August. The average price reduction in January remained at 6%, unchanged from the previous month. Concurrently, 62% of builders offered various sales incentives in January, a figure that has remained stable between 60% and 62% since October.
The forecast for 2024 anticipates growth in single-family starts, providing much-needed inventory to the market. As home building expands in 2024, the market is likely to confront growing supply-side challenges, leading to higher prices and/or shortages of lumber, lots, and labor.
Key Homebuilding Stocks
Adding some homebuilding stocks to your portfolio seems to be a judicious move at this point, given solid demand. With the help of the Zacks Stock Screener, we have zeroed in on five stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) having favorable metrics. A top Zacks Rank indicates that these stocks have been witnessing positive estimate revisions, which generally translate into rapid price appreciation.
Companies like Century Communities, Inc. (CCS - Free Report) , Dream Finders Homes, Inc. (DFH - Free Report) , Taylor Morrison Home Corporation (TMHC - Free Report) , PulteGroup, Inc. (PHM - Free Report) and NVR, Inc. (NVR - Free Report) have been gaining from their fundamental strength and the above-mentioned tailwinds.
Century Communities: CCS — a Zacks Rank #1 stock — has gained 50.1% this year. Earnings estimates for 2024 have increased to $8.78 per share from $8.59 over the past 30 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
CCS — a Greenwood Village, CO-based homebuilder — surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 45.3%. Earnings for 2024 are expected to grow 18.1% year over year.
Dream Finders Homes: This Jacksonville, FL-based homebuilder currently sports a Zacks Rank #1. Shares have gained 199.2% over the past year.
Dream Finders Homes’ earnings per share (EPS) estimates for 2024 have increased to $2.81 from $2.62 over the past 30 days. Earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed on one occasion, the average being 131.6%. Earnings for 2024 are expected to grow 12.2% year over year.
Taylor Morrison Home: Based in Scottsdale, AZ, this company operates as a public homebuilder in the United States. TMHC currently carries a Zacks Rank #2 and has gained 59.7% over the past year.
TMHC’s EPS estimates for 2024 have increased to $6.68 from $6.61 over the past 30 days. The company’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 17.5%.
PulteGroup: Based in Atlanta, GA, this homebuilder currently carries a Zacks Rank #2. Shares have gained 106.8% over the past year.
PHM’s EPS estimates for 2024 have increased to $11.37 from $11.33 over the past 30 days. The company’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 21%.
NVR: Headquartered in Reston, VA, this homebuilder also carries a Zacks Rank #2. Shares have gained 44.1% over the past year.
NVR’s EPS estimates for 2024 have increased to $415.54 from $412.00 over the past 30 days. The company’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 14.6%.
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Builder Sentiment Gains as Rates Fall: 5 Top Housing Picks
Builder confidence in the market for newly constructed single-family homes rose in January, marking the second consecutive monthly gain. The recent decline in rates has bolstered housing affordability, leading to a resurgence of buyers who were discouraged in the fall due to elevated borrowing costs.
Key Takeaways
Builder confidence in newly built single-family homes rose by seven points in January to reach a level of 44, as reported by the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).
Mortgage rates consistently below 7% in the last month have significantly bolstered builder confidence as the new year begins. As of Jan 11, 2024, mortgage rates have shown minimal movement over the past three weeks, maintaining a range in the mid-6%, contributing to a modest increase in homebuyer demand. The 30-year fixed mortgage rate is 6.66% for the week ending Jan 11, 2024, according to data from Freddie Mac.
Since late October 2023, mortgage rates have decreased by more than 110 basis points, according to Freddie Mac. This positive trend has shifted the future sales expectation component in the HMI into positive territory for the first time since August.
Notably, all three major HMI indices posted gains in January. The HMI index assessing current sales conditions rose by seven points to 48, the component measuring sales expectations in the next six months increased 12 points to 57, and the component evaluating the traffic of prospective buyers grew by five points to 29.
Analyzing the three-month moving averages for regional HMI scores, the Northeast saw a four-point increase to 55, the South experienced a two-point increase to 41, the West recorded a one-point gain to 32, and the Midwest remained steady at 34.
Importantly, despite the decline in mortgage rates to below 7% in the past month, many builders are still opting to reduce home prices to stimulate sales. In January, 31% of builders reported price reductions, a decrease from 36% in the previous two months and the lowest rate since last August. The average price reduction in January remained at 6%, unchanged from the previous month. Concurrently, 62% of builders offered various sales incentives in January, a figure that has remained stable between 60% and 62% since October.
The forecast for 2024 anticipates growth in single-family starts, providing much-needed inventory to the market. As home building expands in 2024, the market is likely to confront growing supply-side challenges, leading to higher prices and/or shortages of lumber, lots, and labor.
Key Homebuilding Stocks
Adding some homebuilding stocks to your portfolio seems to be a judicious move at this point, given solid demand. With the help of the Zacks Stock Screener, we have zeroed in on five stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) having favorable metrics. A top Zacks Rank indicates that these stocks have been witnessing positive estimate revisions, which generally translate into rapid price appreciation.
Companies like Century Communities, Inc. (CCS - Free Report) , Dream Finders Homes, Inc. (DFH - Free Report) , Taylor Morrison Home Corporation (TMHC - Free Report) , PulteGroup, Inc. (PHM - Free Report) and NVR, Inc. (NVR - Free Report) have been gaining from their fundamental strength and the above-mentioned tailwinds.
Century Communities: CCS — a Zacks Rank #1 stock — has gained 50.1% this year. Earnings estimates for 2024 have increased to $8.78 per share from $8.59 over the past 30 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
CCS — a Greenwood Village, CO-based homebuilder — surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 45.3%. Earnings for 2024 are expected to grow 18.1% year over year.
Dream Finders Homes: This Jacksonville, FL-based homebuilder currently sports a Zacks Rank #1. Shares have gained 199.2% over the past year.
Dream Finders Homes’ earnings per share (EPS) estimates for 2024 have increased to $2.81 from $2.62 over the past 30 days. Earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed on one occasion, the average being 131.6%. Earnings for 2024 are expected to grow 12.2% year over year.
Taylor Morrison Home: Based in Scottsdale, AZ, this company operates as a public homebuilder in the United States. TMHC currently carries a Zacks Rank #2 and has gained 59.7% over the past year.
TMHC’s EPS estimates for 2024 have increased to $6.68 from $6.61 over the past 30 days. The company’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 17.5%.
PulteGroup: Based in Atlanta, GA, this homebuilder currently carries a Zacks Rank #2. Shares have gained 106.8% over the past year.
PHM’s EPS estimates for 2024 have increased to $11.37 from $11.33 over the past 30 days. The company’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 21%.
NVR: Headquartered in Reston, VA, this homebuilder also carries a Zacks Rank #2. Shares have gained 44.1% over the past year.
NVR’s EPS estimates for 2024 have increased to $415.54 from $412.00 over the past 30 days. The company’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 14.6%.