Existing Home Sales Hit New High in September: 5 Winners

Ritujay Ghosh
·5-min read

It’s proving to be a great summer for the housing market, with more Americans buying homes this season. Existing home sales rose for the fourth straight month, according to the National Association of Realtors ("NAR").

The coronavirus pandemic has battered the global economy and almost all industries have been deeply impacted. With millions losing jobs over the past few weeks, finance has been a major problem. This had directly impacted the homebuilder market, with few Americans buying homes. However, as the economy started reopening, people too started flocking to buy home. And the trend has been positive all summer.

Existing Home Sales Touch New High

Sales of existing homes jumped a staggering 9.4% in September to a seasonally adjusted annualized rate of 6.54 million units, according to the NAR. Sales were 21% higher year over year. This is also the highest sales pace since 2006, before the Great Recession and comes after four consecutive months of growth in sales.

Total housing inventory at the end of September, according to NAR, came in at 1.47 million units, down 1.3% from August and 19.2% year over year. Given the robust demand for homes, the median price of an existing home in September was $311,800, up 14.8% from the year-ago period. September’s price increase also marks 103 months of consecutive year-over-year gains.

Supply Shortage, Low Mortgage Rate Pushing Demand

Understandably, homebuilders are benefiting from a severe shortage of existing homes for sale. There were already fewer homes to meet demand before the pandemic, which has further tightened as fewer homeowners are now willing to list their homes for sale.

Many other factors are also helping home sales since states started to relax stay-at-home restrictions. Coronavirus resulted in record job losses in April, and a collapse in manufacturing output and retail sales. People also postponed their plans of buying homes as they feared blocking their money by buying property. However, U.S. consumer confidence and consumer spending started improving since May, indicating that life is somewhat going back to normal.

Moreover, home-buying activity is getting another boost from record-low mortgage rates, which have dropped below 3% for a 30-year-fixed rate mortgage for the first time in almost 50 years. Thus, new home sales are likely to get a boost in the coming days also.

Our Choices

The rise in homebuilder sentiment coupled with a jump in existing homes sales are indications that buyers are showing interest with the U.S. economy gradually reopening and people going back to work. In this opportune time to invest in homebuilding, we suggest five stocks with a Zacks Rank #1 (Strong Buy) that are likely to gain ahead. You can see the complete list of today’s Zacks #1 Rank stocks here.

Meritage Homes Corporation MTH 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 50.2%. The Zacks Consensus Estimate for current-year earnings has improved 1.9% over the past 60 days. 

Beazer Homes USA, Inc. BZH designs, builds and sells single-family homes. The company designs homes to appeal primarily to entry-level and first move-up home buyers. 

The company’s expected earnings growth rate for the current year is 20.5%. The Zacks Consensus Estimate for current-year earnings has improved 8.5% over the past 60 days.

Toll Brothers Inc. TOL builds single-family detached and attached home communities; master planned luxury residential resort-style golf communities; and urban low, mid, and high-rise communities, principally on the land it develops and improves.

The company’s expected earnings growth rate for next year is 53.3%. The Zacks Consensus Estimate for current-year earnings has improved 9.7% over the past 60 days. 

PulteGroup, Inc. PHM engages in homebuilding and financial services businesses, primarily in the United States. The company conducts operations through two primary business segments — Homebuilding and Financial Services.

The company’s expected earnings growth rate for the current year is 24.4%. The Zacks Consensus Estimate for current-year earnings has improved 1.4% over the past 60 days. 

Lennar Corporation LEN is engaged in homebuilding and financial services in the United States. The company’s reportable segments consist of Homebuilding, Lennar Financial Services, Rialto and Lennar Multifamily.

The company’s expected earnings growth rate for the current year is 25.4%. The Zacks Consensus Estimate for current-year earnings has improved 12.3% over the past 60 days.

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PulteGroup, Inc. (PHM) : Free Stock Analysis Report
 
Toll Brothers Inc. (TOL) : Free Stock Analysis Report
 
Beazer Homes USA, Inc. (BZH) : Free Stock Analysis Report
 
Lennar Corporation (LEN) : Free Stock Analysis Report
 
Meritage Homes Corporation (MTH) : Free Stock Analysis Report
 
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