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Homebuilders indubitably have been bearing supply-side bottlenecks including the dearth of skilled labor, and are grappling with an increase in prices of lumber. However, strong buyer demand boosted homebuilder sentiment in March. Builders are now more optimistic about their business condition than they have been since last summer.
The National Association of Home Builders reported that its homebuilder sentiment index increased 3 points to 51 in March, the highest level since July 2023. The monthly confidence index was at 44 a year ago. It’s also more than analysts’ expectation of 48. Most importantly, the homebuilder sentiment moved into the positive territory since it broke above the point of 50.
Homebuilder sentiment improved primarily due to lower mortgage rates. The Federal Reserve’s aggressive tightening policies drove the 30-year mortgage rate to a two-decade high of almost 8% in October. But the Fed’s current dovish stance helped the 30-year mortgage rate to drop, averaging 6.74% for the week ending Mar 14, per Freddie Mac. The 30-year mortgage rate may have increased slightly last week, but it continues to hover around the 7% mark.
Homebuilders, meanwhile, expect the 30-year mortgage rate to fall this year as the Fed is likely to announce three interest rate cuts in the second half of 2024. The Fed has approached the end of its tightening cycle, which bodes well for the housing market. Interest rate cuts will certainly make it easier to acquire physical properties, which won’t be pricey.
Nonetheless, among strong demand fewer homebuilders are trimming home prices to lift sales. In reality, builders are confident about their present sales conditions. The index that measures current sales increased by 4 points to 56, while the expectations index for sales over the next six-month period rose 2 points to 62. Additionally, the buyer traffic index advanced 2 points to 34. Sentiments among homebuilders mostly improved in the West and Midwest regions.
Thus, banking on bullish homebuilder sentiment, housing stocks such as Century Communities, Inc. (CCS - Free Report) , Dream Finders Homes, Inc. (DFH - Free Report) and KB Home (KBH - Free Report) are well-positioned to gain in the near term. Moreover, the construction of new homes has already rebounded in February, a blessing in disguise for these housing stocks.
These stocks flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). The search was also narrowed down with a VGM Score of A or B. Here V stands for Value, G for Growth and M for Momentum, and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners. You can see the complete list of today’s Zacks #1 Rank stocks here.
Century Communities is a home building and construction company. CCS, presently, has a Zacks Rank #1 and a VGM Score of B. The Zacks Consensus Estimate for its current-year earnings has moved up 17.3% over the past 60 days. CCS’ expected earnings growth rate for the current year is 24.4%.
Dream Finders Homes is a homebuilding company. DFH currently has a Zacks Rank #1 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings has moved up 11.7% over the past 60 days. DFH’s expected earnings growth rate for the current year is 12.5%.
KB Home is a well-known homebuilder in the United States. KBH, presently, has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings has moved up 2.6% over the past 60 days. KBH’s expected earnings growth rate for the current year is 10.8%.
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3 Top Housing Stocks Worth a Buy Ahead of Q2
Homebuilders indubitably have been bearing supply-side bottlenecks including the dearth of skilled labor, and are grappling with an increase in prices of lumber. However, strong buyer demand boosted homebuilder sentiment in March. Builders are now more optimistic about their business condition than they have been since last summer.
The National Association of Home Builders reported that its homebuilder sentiment index increased 3 points to 51 in March, the highest level since July 2023. The monthly confidence index was at 44 a year ago. It’s also more than analysts’ expectation of 48. Most importantly, the homebuilder sentiment moved into the positive territory since it broke above the point of 50.
Homebuilder sentiment improved primarily due to lower mortgage rates. The Federal Reserve’s aggressive tightening policies drove the 30-year mortgage rate to a two-decade high of almost 8% in October. But the Fed’s current dovish stance helped the 30-year mortgage rate to drop, averaging 6.74% for the week ending Mar 14, per Freddie Mac. The 30-year mortgage rate may have increased slightly last week, but it continues to hover around the 7% mark.
Homebuilders, meanwhile, expect the 30-year mortgage rate to fall this year as the Fed is likely to announce three interest rate cuts in the second half of 2024. The Fed has approached the end of its tightening cycle, which bodes well for the housing market. Interest rate cuts will certainly make it easier to acquire physical properties, which won’t be pricey.
Nonetheless, among strong demand fewer homebuilders are trimming home prices to lift sales. In reality, builders are confident about their present sales conditions. The index that measures current sales increased by 4 points to 56, while the expectations index for sales over the next six-month period rose 2 points to 62. Additionally, the buyer traffic index advanced 2 points to 34. Sentiments among homebuilders mostly improved in the West and Midwest regions.
Thus, banking on bullish homebuilder sentiment, housing stocks such as Century Communities, Inc. (CCS - Free Report) , Dream Finders Homes, Inc. (DFH - Free Report) and KB Home (KBH - Free Report) are well-positioned to gain in the near term. Moreover, the construction of new homes has already rebounded in February, a blessing in disguise for these housing stocks.
These stocks flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). The search was also narrowed down with a VGM Score of A or B. Here V stands for Value, G for Growth and M for Momentum, and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners. You can see the complete list of today’s Zacks #1 Rank stocks here.
Century Communities is a home building and construction company. CCS, presently, has a Zacks Rank #1 and a VGM Score of B. The Zacks Consensus Estimate for its current-year earnings has moved up 17.3% over the past 60 days. CCS’ expected earnings growth rate for the current year is 24.4%.
Dream Finders Homes is a homebuilding company. DFH currently has a Zacks Rank #1 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings has moved up 11.7% over the past 60 days. DFH’s expected earnings growth rate for the current year is 12.5%.
KB Home is a well-known homebuilder in the United States. KBH, presently, has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings has moved up 2.6% over the past 60 days. KBH’s expected earnings growth rate for the current year is 10.8%.