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Coronavirus Makes Housing Stocks a Must Buy: 5 Choices

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The novel coronavirus has been officially declared a pandemic by the World Health Organization. It has claimed more than 6,000 lives worldwide, and has impacted corporate profit margins and global economic growth.

In fact, policymakers are now struggling to contain the spread of the deadly virus and eventually its impact on the economy. Policy makers unanimously agreed to trim benchmark federal funds rate a full percentage point to a range of zero to 0.25%, where it had been for several years following the 2008 financial crisis. Earlier this month, in a rare inter-meeting move, the Fed trimmed its benchmark interest rate by half a percentage point to a range of 1-1.25%.

The Fed’s surprise rate cuts did little to improve sentiments. After all, Fed’s emergency rate cuts suggested that the impact of the outbreak on the economy is much worse than what was estimated by market pundits. Moreover, a rate cut lowers borrowing costs. But in the case of the coronavirus outbreak, the bigger problem lies with demand contraction due to travel restrictions as well as supply disruptions. Now, such issues can’t be tackled just by rate cuts.

But as the coronavirus outbreak continues to wipe out money from the U.S. stock market, investors have started to focus on safe havens. In fact, the virus scare has now fueled demand for U.S. debt, which in turn pulled Treasury yields to new record lows.

The yield on the 10-year Treasury note dropped 22.4 basis points to 0.722% on Mar 16, its biggest one-day drop since March 2009. While the two-year note rate dropped 12.4 basis points to 0.360%, the 30-year bond yield declined 2.2 basis points to 1.319%.

Having said that, mortgage rates are most likely to go down as they generally follow the direction of the yield on the 10-year Treasury note in the United States. And lower mortgage rates will certainly boost homebuying.

Notably, millennials are anticipated to propel the housing market this year. Most of these individuals will turn 30 this year and consider buying their first home. In fact, millennials are expected to take half of all mortgages this year, surpassing both Generation X and Baby Boomers, per realtor.com.

The report states that demand for especially entry-level homes will pick up, thanks to millennials driving overall demand. And buyers will certainly benefit from more or less flat home prices, which are predicted to increase meagerly. The report added that home prices may even decline in some of the U.S. cities.

5 Solid Buys

Given the aforesaid positives, investing in housing-related stocks that can make the most of the likely decline in mortgage rates this year seems judicious. We have, thus, selected five such stocks that carry a Zacks Rank #1 (Strong Buy) or 2 (Buy).

D.R. Horton, Inc. (DHI - Free Report) operates as a homebuilding company. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has jumped 6.9% over the past 60 days. The company’s expected earnings growth rate for the current quarter and year is 20.4% and 22.4%, respectively.

PulteGroup, Inc. (PHM - Free Report) has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has climbed 5.4% over the past 60 days. The company’s expected earnings growth rate for the current quarter and year is 18.6% and 17.2%, respectively.

TopBuild Corp. (BLD - Free Report) engages in the installation and distribution of insulation and other building products to the U.S. construction industry. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 4.5% over the past 60 days. The company’s expected earnings growth rate for the current quarter and year is 19.8% and 19.3%, respectively. You can see the complete list of today’s Zacks #1 Rank stocks here.

Floor & Decor Holdings, Inc. (FND - Free Report) operates as a multi-channel specialty retailer of hard surface flooring and related accessories. The company has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved up 4.5% over the past 60 days. The company’s expected earnings growth rate for the current quarter and year is 13.8% and 21.7%, respectively.

Cornerstone Building Brands, Inc. designs, engineers, manufactures, and markets external building products. The company has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved 3.6% north over the past 60 days. The company’s expected earnings growth rate for the current quarter and year is 21.4% and 46.2%, respectively.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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