For Immediate Release
Chicago, IL –August 23, 2019 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Meritage Homes (MTH - Free Report) , Taylor Morrison Home (TMHC - Free Report) , M/I Homes (MHO - Free Report) and D.R. Horton (DHI - Free Report) .
Here are highlights from Thursday’s Analyst Blog:
4 Housing Stocks to Buy as Existing Home Sales Pick Up Pace
Sales of previously owned homes increased in July, despite shortage of lower-priced homes. After declining for the last five consecutive months, the metric increased on declining mortgage rates, which improved affordability, and strong labor market. Also, it outpaced the consensus estimate by 0.7%.
Despite headwinds arising from a global economic slowdown, the overall U.S. housing industry looks good, supported by the Federal Reserve’s dovish stance. While low mortgage/interest rates are helping prospective buyers, shortage of low-priced homes is pushing up prices, making it difficult for them to get involved in more transactions.
Let’s delve deeper into the numbers to get a clearer picture of the announcement.
Encouraging Home Sales Data
Per the National Association of Realtors’ (“NAR”), sales of existing homes, accounting for more than 90% of total U.S. home sales, grew 2.5% from the previous month to a seasonally adjusted annual rate of 5.42 million units in July. Also, the metric rose 0.6% from 5.39 million reported in July 2018. Notably, it was the first year-over-year increase in the last 17 months and the second highest level in 2019.
Post the news release, the exchange-traded funds or ETFs that track the homebuilding industry witnessed an upside. The SPDR S&P Homebuilders ETF increased 1.5%, iShares U.S. Home Construction ETF gained 1.4% and Invesco Dynamic Building & Const ETF was also up 1%.
Sales in the West region jumped 8.3% from the prior month but were down 0.8% from year-ago period. Sales in the Northeast, which account for the majority of existing home sales, fell 2.9% from June and 4.3% year over year.
Median existing-home price in the month rose 4.3% to $280,800 from the comparable year-ago period, marking the 89th straight month of year-over-year increase.
Inventory slipped in the month, leaving lesser number of homes for future sales. Total housing available for sale decreased 1.6% from both June 2019 and July 2018 level. Unsold inventory is at a 4.2-month supply level, at the current sales pace, which is down from 4.4 months in June and 4.3 months a year ago.
In the words of NAR’s chief economist Lawrence Yun, “Home buying is a serious long-term decision and current low or even lower future mortgage rates may not in themselves meaningfully boost sales unless accompanied by improved consumer confidence.”
First-time buyers accounted for 32% of sales in July, down from 35% reported in the prior month and in line with a year ago. Moreover, NAR revealed that the annual share of first-time buyers in 2018 was 33%.
A Look at Recent Mortgage Rates
According to the latest Freddie Mac Primary Mortgage Market Survey, mortgage rates remained flat for the week ending Aug 15 from a week ago and declined 93 points from a year ago. Notably, the average U.S. rate for a 30-year fixed mortgage was lowest since November 2016. Also, mortgage demand reached a three-year high in the said week. Declining mortgage rates allowed refinance activity to exceed past records.
As revealed by Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending Aug 16, Refinance Index grew 0.4% from the previous week and a notable 180% from the year-ago period, reaching the highest level since July 2016.
Along with lower mortgage rates, the recent cut in interest rates by Fed to stimulate growth in economic activities is a boon for the housing industry.
Lower interest rates will reduce the cost of borrowing for consumers, thereby aiding buyers to have greater access to funds. Notable homebuilders are optimistic as they have been reporting firm demand for single-family homes. However, they continue to struggle with rising construction costs stemming from excessive regulations, persistent shortage of workers and lack of buildable lots.
4 Must-Buy Housing Stocks
There are plenty of reasons to be optimistic about the broader housing sector over both the short and the long term. However, picking winning stocks may be difficult.
With the help of the Zacks Stock Screener, we have zeroed in on four stocks that have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of A or B. A top Zacks Rank indicates that these stocks have been witnessing positive estimate revisions, which generally translates into rapid price appreciation.
Our VGM Score identifies stocks that have the most attractive value, growth and momentum characteristics. In fact, our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2, are solid bets. You can see the complete list of today’s Zacks #1 Rank stocks here.
Meritage Homes, which designs and builds single-family homes in the United States, sports a Zacks Rank #1 and has a VGM Score A. The Zacks Consensus Estimate for its current-year earnings has increased 10.5% over the past 30 days. The company's expected three-five-year earnings growth is 8.2%.
Taylor Morrison Home, a public homebuilder in the United States, currently sports a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has increased 4.5% over the past 30 days. Moreover, the company currently has a VGM Score of A.
M/I Homesoperates as a builder of single-family homes in the United States. The company currently sports a Zacks Rank #1 and has a VGM Score A. The Zacks Consensus Estimate for its current-year earnings has increased 9% over the past 30 days.
D.R. Hortonprimarily engages in the homebuilding business in the United States. The company currently carries a Zacks Rank #2 and has a VGM Score A. The Zacks Consensus Estimate for its current-year earnings has increased 6.6% over the past 30 days. The company is expected to see earnings growth of 11% over the next three to five years.
It’s Illegal in 42 States, But Investors Will Make Billions Legally
In addition to the companies you read about above, today you get details on the newly-legalized industry that’s tapping into a “habit” that Americans spend an estimated $150 billion on every year.
That’s twice as much as they spend on marijuana, legally or otherwise.
Zacks special report revealing how investors can profit from this new opportunity. As more states legalize this activity, the industry could expand by as much as 15X. Zacks’ has just released a Special Report revealing 5 top stocks to watch in this space.
See these 5 “sin stocks” now>>
Zacks Investment Research
800-767-3771 ext. 9339
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.