August Home Sales Soar to 7-Month High: 5 Top Housing Picks
Here we take a look at five housing stocks that have tremendous potential on stellar market fundamentals despite all odds.
Pending home sales rebounded to a seven-month high in August after two months of decline. Greater inventory, moderating price conditions and low mortgage rates have been aiding the revival in demand in the U.S. housing industry. The results even outpaced analysts’ expectations by a significant 1,925%.
The Pending Home Sales Index — a forward-looking indicator based on contract signings — increased 8.1% to 119.5 in August from July, according to the latest report from the National Association of Realtors or NARs. Each of the four major U.S. regions registered month-over-month gains in contract activity. The index, however, declined 8.3% year over year.
NAR chief economist, Lawrence Yun said, "Rising inventory and moderating price conditions are bringing buyers back to the market."
Sales jumped the most in low-cost regions, namely the Midwest and South. In the South, the index increased 8.6% to 141.8 while Midwest registered a 10.4% sales increase in August from July. Yun further added, “This can be attributed to some employees who have the flexibility to work from anywhere, as they choose to reside in more affordable places.”
A Snapshot of August Sales
The most recent data from NARs showed that existing home sales faltered 2% from July to 5.88 million in August. With the August decline, sales are now 1.5% less than the year-ago level.
Meanwhile, sales of new homes in the United States rose 1.5% last month from July. In fact, sales of new U.S. single-family homes increased for a second straight month in August. The Commerce Department also showed in the report that the supply of new homes on the market last month was the largest in nearly 13 years, with prices unchanged on a monthly basis.
Even homebuilders have now regained optimism on the U.S. housing market, with homebuilder confidence registering its first monthly gain over the past four months. Defying the unprecedented supply chain disruptions, homebuilder sentiment inched one point higher in September, given solid demand trend and lower lumber prices (read more: Builders Regain Confidence in September: Top 4 Housing Picks).
Given the optimism surrounding the housing market, it’s time you add some profitable housing stocks to your portfolio.
Investors can bet on some housing stocks that can counter market headwinds and come up with solid bottom-line performance. But it might be an uphill task to pick the right stocks for greater investment rewards amid all odds. This is where our Zacks Stock Screener comes in handy.
Here, we have selected five stocks that have a Zacks Rank #1 (Strong Buy) or 2 (Buy), justifying their strong fundamentals, especially for investors beefing up their portfolio amid uncertainty. You can see the complete list of today’s Zacks #1 Rank stocks here.
MI Homes, Inc. MHO: This Columbus, OH-based builder of single-family homes has been benefiting from higher deliveries, greater operating leverage, solid backlog level and increased return of equity. The Zacks Consensus Estimate for earnings for the current year has moved up 32.5% over the past 60 days.
Zacks Rank #1
Price Performance YTD Vs Construction Sector: Up 34% Vs 15.1%
Expected EPS Growth Rate for 2021: 63.3%
Meritage Homes Corporation MTH: Based in Scottsdale, AZ, Meritage Homes is one of the leading designers and builders of single-family homes. Its focus on entry-level LiVE.NOW homes has been a major driving factor. The Zacks Consensus Estimate for 2021 earnings has moved up 2.3% over the past 60 days.
Zacks Rank #2
Price Performance YTD Vs Sector: Up 20.3% Vs 15.1%
Expected EPS Growth Rate for 2021: 72.4%
TopBuild Corp. BLD: Headquartered in Daytona Beach, FL, TopBuild Corp. is an installer and distributor of insulation and other building products. A systematic inorganic strategy will supplement organic growth, and expand its access to additional markets and products. Also, the company's strength in the Insulation Installation business, and improving repair and remodeling activities raise hopes. The Zacks Consensus Estimate for earnings for the current year has moved up 6% over the past 60 days.
Zacks Rank #2
Price Performance YTD Vs Sector: Up 15% Vs 15.1%
Expected EPS Growth Rate for 2021: 47.1%
Landsea Homes Corporation LSEA: Based in Newport Beach, CA, this homebuilding company has been witnessing sustained momentum in its business. Growing backlog, strong presence in Florida and Texas (two of the hottest housing markets in the nation) as well as acquisitions will further drive the company’s growth.
Zacks Rank #2
Price Performance YTD Vs Sector: Down 15% Vs up 15.1%
Although its shares have underperformed the sector, the Zacks Consensus Estimate for 2021 earnings has moved up 30% over the past 60 days, depicting analysts’ optimism over the stock’s bottom-line prospects.
We have selected one more stock from the Zacks Retail - Home Furnishings industry that is well poised on the back of solid momentum in the housing market.
RH RH: Based in Corte Madera, CA, this leading luxury retailer in the home furnishing space has been riding high, given prudent growth initiatives, margin expansion efforts and stellar performance.
Zacks Rank #1
Price Performance YTD Vs Industry: Up 55.3% Vs 52.5%
Expected EPS Growth Rate for fiscal 2021: 45.3%
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Meritage Homes Corporation (MTH): Free Stock Analysis Report
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