U.S. new home sales rose in July for the first time in four months, the Commerce Department said on Aug 24. The reason behind this jump can be somewhat attributed to higher supply despite limited inventories.
Rising prices have been concerns for the homebuilding market lately but that hasn’t stopped people from buying new homes. This once again shows the underlying strength in the housing market.
New Home Sales Grow
The U.S. Census Bureau said that new home sales rose 1% in July, to a seasonally adjusted annual rate of 708,000 units after an upwardly revised 701,000 in June.
The report shows that people have once again started hunting for homes after sales somewhat falling to its lowest level in April. This is primarily because of smooth supply. Despite inventories remaining limited, higher supply has been helping sales.
Sales jumped 14.4% in the West but declined over 20% in the Northeast and Midwest regions.
The report also showed that the median sales price of new homes rose 18.4% from a year earlier to hit a new record high of $390,500. However, despite this jump in price, people are not hesitating to buy new homes.
Home Market Going Strong
After a robust 2020, the home market somewhat started to cool off as prices and mortgage rates grew. Moreover, rising lumber prices and low inventory further hampered sales. However, sales seem to be on the rise again in July.
Earlier this week, the National Association of Realtors in its report said that existing home sales increased 2% in July to a seasonally adjusted annual rate of 5.99 million units. Home re-sales accounted for the majority of U.S. home sales and once again proved that demand is high despite rising prices.
Demand for homes surged during the pandemic as many rushed to buy homes in less-populated areas to avoid contracting the deadly coronavirus. Also, many started looking for bigger homes during the pandemic as they needed more space to work and learn remotely. This sent the homebuilding market on a tear.
Our Choices
Soaring demand for single-family homes is likely to help the homebuilding market in the near term. This thus makes for an opportune time to invest in homebuilding stocks.
KB Home KBH is a well-known homebuilder in the United States. The company’s Homebuilding operations include building and designing homes that cater to first-time, move-up and active adult homebuyers on acquired or developed lands.
The company’s expected earnings growth rate for the current year is 99.4%. The Zacks Consensus Estimate for current-year earnings has improved 9.5% over the past 60 days. The company carries a Zacks Rank #2 (Buy).
NVR Inc is engaged in the construction and sale of single-family detached homes, townhomes and condominium buildings, all of which are primarily constructed on a pre-sold basis.
The company’s expected earnings growth rate for the current year is 51.3%. The Zacks Consensus Estimate for current-year earnings has improved 5.5% over the past 60 days. The company sports a Zacks Rank #1.
Meritage Homes Corporation primarily engages in building and selling single-family homes for entry-level, first-time, move-up, luxury and active-adult buyers in the historically high-growth regions of the United States.
The company’s expected earnings growth rate for the current year is 72.4%. The Zacks Consensus Estimate for current-year earnings has improved 28.9% over the past 60 days. The company sports a Zacks Rank #1.
M/I Homes, Inc. is one of the nation's leading builders of single-family homes. It serves a broad segment of the housing market, including first-time, move-up, luxury and empty-nester buyers.
The company’s expected earnings growth rate for the current year is 63.3%. The Zacks Consensus Estimate for current-year earnings has improved 32.5% over the past 60 days. The company sports a Zacks Rank #1.
Century Communities, Inc. is a home building and construction company. Its activities comprise land acquisition, development and entitlements; and the acquisition, development, construction, marketing, and sale of various single-family detached and attached residential home projects.
The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 10.9% over the past 60 days. Its shares have gained 17.8% year to date. Century Communities carries a Zacks Rank #2.
TRI Pointe Group, Inc. is involved in the design, construction and sale of single-family homes. The company's operating portfolio includes Maracay Homes in Arizona; Pardee Homes in California and Nevada; Quadrant Homes in Washington; Trendmaker Homes in Texas; TRI Pointe Homes in California and Colorado; and Winchester Homes in Maryland and Virginia.
The company’s expected earnings growth rate for the current year is 66.8%. The Zacks Consensus Estimate for current-year earnings has improved 15.3% over the past 60 days. TRI Pointe has a Zacks Rank #2.