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3 Residential Stocks to Buy as the Housing Sector Recovers
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People looking to own homes had a pretty average 2023. Prices of new homes and mortgage rates continued climbing. Monthly mortgage payments were hovering around unchartered territory. Aspiring, as well as existing homeowners, felt the heat in realtime.
There is no doubt that the restrictive monetary policy imposed by the Fed to tackle inflation in the United States over the past two years has been primarily responsible for home prices rising alarmingly. However, with the first rate cut expected sometime later this year, mortgage rates are stabilizing, and the housing market may be staging a comeback.
New home sales, after remaining relatively flat in January and rising over the next couple of months, fell in April. Sales came in at a seasonally adjusted annual rate of 634,000, according to estimates released jointly on May 23 by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.7% below the revised March rate of 665,000. Total existing home sales slid 1.9% in April to a seasonally adjusted annual rate of 4.14 million. Sales also dipped 1.9% from one year ago.
This, coupled with rates coming down in the foreseeable future, is going to bolster demand. The National Association of Realtors, in its quarterly report, forecasts that existing home sales will rise 9% in 2024 to 4.46 million and another 13.2% in 2025 to 5.05 million. Housing starts are expected to rise 1.2% in 2024 to 1.43 million and 4.9% to 1.5 million in 2025 (from 2024).
However, even as mortgage rates improve, they are currently at a significantly high level. The median price for an existing home is at $393,500, a 4.8% jump from a year ago. This is the ninth consecutive month of a year-over-year price increase. While the sector may be on a path of recovery, potential buyers might want to wait for rates to actually go down before making their investment call.
It will be prudent, thus, to venture into the space and select three residential stocks that are likely to gain ground in the ensuing months. The stocks below 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; 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.
M/I Homes, Inc. (MHO - Free Report) is a company that engages in the construction and sale of single-family residential homes.
MHO’s expected earnings growth rate for the current year is 12.2%. The Zacks Consensus Estimate for its current-year earnings has improved 11.9% over the past 60 days. The company has a Zacks Rank #1 and a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
KB Home (KBH - Free Report) is a U.S.-based home-building company.
KBH’s expected earnings growth rate for the current year is 13.9%. The Zacks Consensus Estimate for its current-year earnings has improved 2.8% over the past 60 days. The company has a Zacks Rank #2 and a VGM Score of B.
Centerspace (CSR - Free Report) is an owner and operator of apartment communities.
CSR’s expected earnings growth rate for the next year is 4.9%. The Zacks Consensus Estimate for its next-year earnings has improved 2% over the past 60 days. The company has a Zacks Rank #2 and a VGM Score of B.
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3 Residential Stocks to Buy as the Housing Sector Recovers
People looking to own homes had a pretty average 2023. Prices of new homes and mortgage rates continued climbing. Monthly mortgage payments were hovering around unchartered territory. Aspiring, as well as existing homeowners, felt the heat in realtime.
There is no doubt that the restrictive monetary policy imposed by the Fed to tackle inflation in the United States over the past two years has been primarily responsible for home prices rising alarmingly. However, with the first rate cut expected sometime later this year, mortgage rates are stabilizing, and the housing market may be staging a comeback.
New home sales, after remaining relatively flat in January and rising over the next couple of months, fell in April. Sales came in at a seasonally adjusted annual rate of 634,000, according to estimates released jointly on May 23 by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.7% below the revised March rate of 665,000. Total existing home sales slid 1.9% in April to a seasonally adjusted annual rate of 4.14 million. Sales also dipped 1.9% from one year ago.
This, coupled with rates coming down in the foreseeable future, is going to bolster demand. The National Association of Realtors, in its quarterly report, forecasts that existing home sales will rise 9% in 2024 to 4.46 million and another 13.2% in 2025 to 5.05 million. Housing starts are expected to rise 1.2% in 2024 to 1.43 million and 4.9% to 1.5 million in 2025 (from 2024).
However, even as mortgage rates improve, they are currently at a significantly high level. The median price for an existing home is at $393,500, a 4.8% jump from a year ago. This is the ninth consecutive month of a year-over-year price increase. While the sector may be on a path of recovery, potential buyers might want to wait for rates to actually go down before making their investment call.
It will be prudent, thus, to venture into the space and select three residential stocks that are likely to gain ground in the ensuing months. The stocks below 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; 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.
M/I Homes, Inc. (MHO - Free Report) is a company that engages in the construction and sale of single-family residential homes.
MHO’s expected earnings growth rate for the current year is 12.2%. The Zacks Consensus Estimate for its current-year earnings has improved 11.9% over the past 60 days. The company has a Zacks Rank #1 and a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
KB Home (KBH - Free Report) is a U.S.-based home-building company.
KBH’s expected earnings growth rate for the current year is 13.9%. The Zacks Consensus Estimate for its current-year earnings has improved 2.8% over the past 60 days. The company has a Zacks Rank #2 and a VGM Score of B.
Centerspace (CSR - Free Report) is an owner and operator of apartment communities.
CSR’s expected earnings growth rate for the next year is 4.9%. The Zacks Consensus Estimate for its next-year earnings has improved 2% over the past 60 days. The company has a Zacks Rank #2 and a VGM Score of B.