Rate Cut to Aid Real Estate: 4 Homebuilder Stocks With Room to Grow

Core Insights - The U.S. housing market is showing signs of recovery after a challenging 2023 and the first half of 2024, with homebuilder confidence rebounding and increases in housing starts and building permits [1][2][3] Homebuilder Confidence - The National Association of Home Builders/Wells Fargo Housing Market Index reported that homebuilder confidence for newly built single-family homes rose to 41 in September from 39 in August [2] - Mortgage rates have decreased to their lowest level since February, with the 30-year fixed mortgage rate at 6.2%, down from 7.18% a year ago [2] Housing Starts and Building Permits - Housing starts for privately owned homes increased by 9.6% to an annualized rate of 1.356 million in August, surpassing the consensus estimate of a 2.9% rise [3] - Year-over-year, housing starts rose by 3.9% in August, with single-family housing starts increasing by 15.8% compared to July, reaching 992,000 units [3] - Residential building permits for August rose by 4.9% from the previous month to an annualized rate of 1.475 million units, also exceeding the consensus estimate [3] Federal Reserve Rate Cuts - The Federal Reserve announced a 50-basis point rate cut, the largest since 2008, which is expected to positively impact the housing market, contributing 3.1% to GDP [5] - The rate cut is anticipated to lower mortgage rates further, aiding the homebuilding sector [5] Homebuilder Stocks with Growth Potential - PulteGroup (PHM): Expected earnings growth rate of 14% for the current year, with a Zacks Rank of 2 [6] - Meritage Homes (MTH): Expected earnings growth rate of 6.1% for the current year, also holding a Zacks Rank of 2 [7] - M/I Homes, Inc. (MHO): Expected earnings growth rate of 21.9% for the current year, with a Zacks Rank of 2 [9] - Century Communities (CCS): Expected earnings growth rate of 32.5% for the current year, currently holding a Zacks Rank of 1 [12]