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4 Homebuilder Stocks Set to Gain From Rising Confidence
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U.S. homebuilders are a lot more confident than they were earlier in the year as inflationary pressures continue to ease. With the Federal Reserve finally beginning its easing cycle last month with a jumbo rate cut, homebuilders are confident that mortgage rates will ease in the near term and will boost sales.
Given this situation, investing in homebuilding stocks like KB Home (KBH - Free Report) , Toll Brothers Inc. (TOL - Free Report) , Century Communities, Inc. (CCS - Free Report) and Tri Pointe Homes, Inc. (TPH - Free Report) would be an ideal choice.
Homebuilder Confidence Jumps
According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder confidence for newly-built single-family homes jumped to 43 in October, up two points from 41 in September. This is the second straight month that homebuilder confidence has increased.
In October, all three HMI indices showed growth. The index for current sales conditions rose two points to 47, while the sales expectations for the next six months saw a significant four-point increase, reaching 57. The measure of prospective buyer traffic also improved, advancing two points to 29.
The renewed confidence is being driven by optimism surrounding improving market conditions. Although prices are still high, they have eased considerably over the past few months. Homebuilders believe that improving conditions will help boost demand for new homes in the near term.
High Mortgage Rates Hurting Homebuilder Stocks
The Federal Reserve cut interest rates by 50 basis points in September, the first time since March 2020 and stocks have rallied since then. However, the mortgage rates are still hovering above 6%. The 30-year fixed mortgage rate jumped to 6.44% last week, up from 6.32% a week earlier.
Although the current mortgage rates are much lower than the historic high of 7.79% seen in October 2023, it still needs to ease to boost demand.
NAHB Chief Economist Robert Dietz noted that even though the Federal Reserve has started its easing cycle, many potential home buyers are holding off, waiting for interest rates to drop further.
Market participants are expecting two more 25 basis point interest rate cuts by the end of this year, which is expected to provide major support to the homebuilding market. The Zacks Building Products - Home Builders industry has gained 31.6% year to date, significantly outpacing the growth of both the Zacks Construction sector, which increased by 17.6%, and the S&P 500 Index, which grew by 22.7%.
4 Homebuilder Stocks With Upside
Given this situation, the housing market is projected to perform well in the near term as rate cuts should lower mortgage rates. Investing in homebuilding stocks thus appears to be a wise decision. Each of these stocks carries a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
KB Home
KB Home is a well-known homebuilder in the United States and one of the largest in the state. KBH’s Homebuilding operations include building and designing homes that cater to first-time, move-up and active adult homebuyers on acquired or developed lands. KB Home also builds attached and detached single-family homes, town homes and condominiums.
KB Home’s expected earnings growth rate for next year is 19.8%. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the past 60 days. KBH presently carries a Zacks Rank #2.
Image Source: Zacks Investment Research
Toll Brothers
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 17.5%. The Zacks Consensus Estimate for current-year earnings improved 3.4% over the past 60 days. Toll Brothers presently has a Zacks Rank #3.
Image Source: Zacks Investment Research
Century Communities
Century Communities, Inc. is a home building and construction company. CCS’s activities comprise land acquisition, development and entitlements; and the acquisition, development, construction, marketing, and sale of various single-family detached and attached residential home projects.
Century Communities’expected earnings growth rate for the current year is 32.5%. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the past 60 days. CCS presently has a Zacks Rank #3.
Image Source: Zacks Investment Research
Tri Pointe Homes
Tri Pointe Homes, Inc. is involved in the design, construction and sale of single-family homes. TPH’s operating portfolio includes Maracay Homes in Arizona; Pardee Homes in California and Nevada; Quadrant Homes in Washington; Trendmaker Homes in Texas; TRI Pointe Homes in California and Colorado; and Winchester Homes in Maryland and Virginia.
Tri Pointe Homes’ expected earnings growth rate for the current year is 35.7%. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the past 60 days. TPH has a Zacks Rank #3.
Image Source: Zacks Investment Research
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4 Homebuilder Stocks Set to Gain From Rising Confidence
U.S. homebuilders are a lot more confident than they were earlier in the year as inflationary pressures continue to ease. With the Federal Reserve finally beginning its easing cycle last month with a jumbo rate cut, homebuilders are confident that mortgage rates will ease in the near term and will boost sales.
Given this situation, investing in homebuilding stocks like KB Home (KBH - Free Report) , Toll Brothers Inc. (TOL - Free Report) , Century Communities, Inc. (CCS - Free Report) and Tri Pointe Homes, Inc. (TPH - Free Report) would be an ideal choice.
Homebuilder Confidence Jumps
According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder confidence for newly-built single-family homes jumped to 43 in October, up two points from 41 in September. This is the second straight month that homebuilder confidence has increased.
In October, all three HMI indices showed growth. The index for current sales conditions rose two points to 47, while the sales expectations for the next six months saw a significant four-point increase, reaching 57. The measure of prospective buyer traffic also improved, advancing two points to 29.
The renewed confidence is being driven by optimism surrounding improving market conditions. Although prices are still high, they have eased considerably over the past few months. Homebuilders believe that improving conditions will help boost demand for new homes in the near term.
High Mortgage Rates Hurting Homebuilder Stocks
The Federal Reserve cut interest rates by 50 basis points in September, the first time since March 2020 and stocks have rallied since then. However, the mortgage rates are still hovering above 6%. The 30-year fixed mortgage rate jumped to 6.44% last week, up from 6.32% a week earlier.
Although the current mortgage rates are much lower than the historic high of 7.79% seen in October 2023, it still needs to ease to boost demand.
NAHB Chief Economist Robert Dietz noted that even though the Federal Reserve has started its easing cycle, many potential home buyers are holding off, waiting for interest rates to drop further.
Market participants are expecting two more 25 basis point interest rate cuts by the end of this year, which is expected to provide major support to the homebuilding market. The Zacks Building Products - Home Builders industry has gained 31.6% year to date, significantly outpacing the growth of both the Zacks Construction sector, which increased by 17.6%, and the S&P 500 Index, which grew by 22.7%.
4 Homebuilder Stocks With Upside
Given this situation, the housing market is projected to perform well in the near term as rate cuts should lower mortgage rates. Investing in homebuilding stocks thus appears to be a wise decision. Each of these stocks carries a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
KB Home
KB Home is a well-known homebuilder in the United States and one of the largest in the state. KBH’s Homebuilding operations include building and designing homes that cater to first-time, move-up and active adult homebuyers on acquired or developed lands. KB Home also builds attached and detached single-family homes, town homes and condominiums.
KB Home’s expected earnings growth rate for next year is 19.8%. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the past 60 days. KBH presently carries a Zacks Rank #2.
Image Source: Zacks Investment Research
Toll Brothers
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 17.5%. The Zacks Consensus Estimate for current-year earnings improved 3.4% over the past 60 days. Toll Brothers presently has a Zacks Rank #3.
Image Source: Zacks Investment Research
Century Communities
Century Communities, Inc. is a home building and construction company. CCS’s activities comprise land acquisition, development and entitlements; and the acquisition, development, construction, marketing, and sale of various single-family detached and attached residential home projects.
Century Communities’expected earnings growth rate for the current year is 32.5%. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the past 60 days. CCS presently has a Zacks Rank #3.
Image Source: Zacks Investment Research
Tri Pointe Homes
Tri Pointe Homes, Inc. is involved in the design, construction and sale of single-family homes. TPH’s operating portfolio includes Maracay Homes in Arizona; Pardee Homes in California and Nevada; Quadrant Homes in Washington; Trendmaker Homes in Texas; TRI Pointe Homes in California and Colorado; and Winchester Homes in Maryland and Virginia.
Tri Pointe Homes’ expected earnings growth rate for the current year is 35.7%. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the past 60 days. TPH has a Zacks Rank #3.
Image Source: Zacks Investment Research