The demand for homes has risen significantly over the past year, aided by the near-zero interest rate environment and a desire for better and bigger living spaces driven in-part by new work/homelife conventions. We think that because the housing market remains hot, with low inventory and rising prices, it could be beneficial to bet now on fundamentally-sound homebuilding stocks Lennar (LEN), PulteGroup (NYSE:PHM), Tri Pointe (NYSE:TPH), and Century Communities (NYSE:CCS). Read on.The housing market has remained red hot amid the COVID-19 pandemic thanks to a near-zero interest-rate environment and a rising demand for bigger and better living spaces in suburban areas to make living and remote working more practical and comfortable. Because the work-from-home trend is expected to continue even in the post-pandemic world--given its benefits for employees and employers--the demand for new houses is not expected to decline any time soon.
The NAHB housing market index in the United States edged up 1 point to 83 in April 2021. The demand for single-family houses has increased significantly. According to the Census Bureau, the sale of new single-family houses increased to its peak since 2006 in March to a seasonally adjusted 1.021 million annual rate, up 21% from February 2021. Given the favorable industry backdrop, investors are rewarding homebuilding stocks, as evidenced by the SPDR S&P Homebuilders ETF’s (XHB) 16.8% gains over the past three months compared to the SPDR S&P 500 ETF Trust’s (SPY) 6.1% returns.
So, we think it could be wise to bet on established homebuilding companies Lennar Corporation (NYSE:LEN), PulteGroup, Inc. (PHM), Tri Pointe Homes , Inc. (TPH), and Century Communities, Inc. (CCS). We believe they are well positioned to capitalize on the industry tailwinds.