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U.S. Mortgage Rate Hits 8-Year Low: 5 Stocks to Invest In

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According to mortgage buyer Freddie Mac, the 30-year mortgage rate fell to 3.29% in the week ending Mar 6, hitting the lowest point since 1971. In the past week, markets have been volatile as investors rushed to buy less risky 10-year Treasury note, pushing its yield to fall below 1%, its lowest level on record. The 30-year mortgage rate tracks the 10-year treasury yield.

The decline in mortgage rates will spur demand for more homes, thereby boosting the U.S. housing market this year. In fact, the Mortgage Bankers Association (MBA) expects refinancing demand to last till coronavirus fears subside and rates stabilize.

Mortgage Refinancing Spikes

The stock marker witnessed a roller-coaster ride in the week ending Mar 6 as the spread of coronavirus clouded investors’ sentiment. With the drop-in mortgage rates there was a significant jump in home loan refinancing applications. In fact, total mortgage application rose 55.4% last week compared to the week before.

Refinancing application hit the highest level since April 2009, rising 79% in the week and 479% from a year ago. According to the MBA, the index measuring purchase applications was 12%, higher than a year ago.

Further, MBA stated that refinancing organizations forecast the volume of refinancing to hit $1.2 trillion by 2020.The figure would mean a 37% increase from the previous year and also “the strongest refinance volume since 2012.”

5 Housing Stocks to Buy

Given the current boom in refinancing and low mortgage rates, it is prudent to invest in home building companies and housing related stocks. Hence, we have shortlisted five such stocks that sport a Zacks Rank #1 (Strong Buy) and generate high returns. You can see the complete list of today’s Zacks #1 Rank stocks here.

Our first choice is home builder, PulteGroup, Inc. (PHM - Free Report) that acquires and develops land primarily for residential purposes; and constructs housing on such land.

The company’s expected earnings growth rate for the current quarter is 18.6% against the Zacks Building Products - Home Builders industry’s projected earnings decline of 0.9%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 6.4% upward over the past 60 days.

Along with home builders, companies that are involved in providing raw materials for construction are also poised to grow. Thus, we have selected AAON, Inc. (AAON - Free Report) , a company that engages in manufacturing and selling of air conditioning and heating equipment.    

The company’s expected earnings growth rate for the current quarter is 66.7% against the Zacks Building Products - Air Conditioner and Heating industry’s projected earnings decline of 10.8%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 13.2% upward over the past 60 days.

Next, we have Floor & Decor Holdings, Inc. (FND - Free Report) , a multi-channel specialty retailer of hard surface flooring and related accessories. The company’s expected earnings growth rate for the current year is 21.7% compared with the Zacks Building Products - Wood industry’s projected earnings growth of 13.3%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 4.5% upward over the past 60 days.

Installed Building Products, Inc. (IBP - Free Report) engages in installation of insulation, waterproofing, fireproofing, garage doors, rain gutters, window blinds, shower doors, closet shelving and mirrors, and other products.The company’s expected earnings growth rate for the current year is 19.5% compared with the Zacks Building Products - Miscellaneous industry’s projected earnings growth of 15.9%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 6.2% upward over the past 60 days.

Last on the list is Cornerstone Building Brands, Inc. (CNR - Free Report) , a company that designs, engineers, manufactures, and markets external building products. The company’s expected earnings growth rate for the current quarter is 21.4% against the Zacks Building Products - Concrete and Aggregates industry’s projected earnings decline of 90.6%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 3.6% upward over the past 60 days.

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