Housing Stocks to Buy if the Real Estate Market Stays Hot
While these trends won’t last forever, they are likely going to be in play for the next few quarters, at a minimum. That’s why we’ve put together a list of...
Check Out These Stocks If You Think the Housing Market Stays Hot
Even with mortgage rates heading up and many companies facing supply chain issues for the foreseeable future, the incredible demand for housing continues to drive profits higher for some of the top companies in the industry. Back in October, The U.S. Department of Commerce reported that sales of new single-family homes rose 14% in September from the prior month, which tells us that there is still plenty of momentum in the real estate market. More signs of strength include the fact that median home prices hit a new record high in Q3.
It’s also important to note the trend of people spending big on home décor, as this is also providing interesting investing opportunities. With more people working from home than ever before and homeowners interested in stylishly furnishing their new pads, specialty retailers that offer high-quality goods have also been huge beneficiaries of the hot housing market.
While these trends won’t last forever, they are likely going to be in play for the next few quarters, at a minimum. That’s why we’ve put together a list of housing stocks to buy if the real estate market stays hot. Let’s take a deeper look below.
D.R. Horton (NYSE:DHI)
Given how competitive the homebuilding industry is, it can really pay off to focus on the market leaders. D.R. Horton certainly falls under that category, as it's one of the largest publicly traded U.S. homebuilders by market capitalization, the number of homes delivered, and revenues. This company has something to offer almost any homebuyer, with some of the most affordable starter homes on the market, attractive move-up homes, and even options for luxury buyers. The company’s scale is a major advantage for investors to consider as well, as D.R. Horton can oftentimes take advantage of volume discounts with suppliers.
The stock is up over 37% year-to-date, yet really hasn’t done much since May, which means it could be on the verge of taking the next leg up. The company’s latest earnings report might just be the catalyst that drives the share price higher in the coming weeks, as D.R. Horton beat consensus estimates for Q4 EPS by $0.30. Taking a high-level look at the company’s fiscal year confirms just how strong the hot housing market has been working in D.R. Horton’s favor, as FY21 net income per diluted share increased by 78% and the company reported that its homes closed increased 25% to 81,965 homes and grew 35% in value to $26.5 billion.
This might be the best specialty retail stock to consider owning for the long term, particularly considering how the company has been executing at such a high level over the last few quarters. Williams-Sonoma provides high-quality home furnishings via its retail stores and direct-to-consumer sales channels and has developed several distinct brands that truly stand out in the crowded retail space. These brands include cooking products retailer Williams Sonoma, high-end home furnishings retailer Pottery Barn, and West Elm, a sustainable home-furnishing retailer targeting millennials and young professionals. While the company has around 581 brick-and-mortar retail stores, it’s worth mentioning that about 65% of the company’s sales come from its e-commerce channel. That tells us that the company has really nailed its direct-to-consumer offerings, which should continue to generate sales growth going forward.
Williams-Sonoma is a company that has truly been thriving during the pandemic, evident in its record Q2 earnings results. The company reported revenue growth of 30.7% with comparable brand revenue growth of 29.8% and GAAP Diluted EPS of $3.21, up 80% year-over-year. Investors should also be impressed with the fact that the company increased its quarterly dividend by 20% and authorized a new stock repurchase program of $1.25 billion. Given the strength in the housing market and how people are spending big on improving their living spaces at this time, investors should probably expect another big quarter from the company when it reports its Q3 earnings on November 18th.