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Sales of U.S. new homes increased better-than-expected in March, according to data released by the Census Bureau and the Department of Housing and Urban Development on Tuesday. Moreover, sales of existing homes too jumped for the second consecutive month in March, according to the National Association for Realtors (NAR). This is a clear indication that an increasing number of Americans prefer buying homes.
Moreover, consumer confidence rebounded in April to a level close to the 18-year high it had hit in February. Understandably, the jump in sales of both new homes and existing homes hint at the underlying strength in the economy, increasing wages, higher number of jobs, greater spending power and high consumer confidence, despite signs of slow growth in the first quarter. Given this backdrop, it makes good sense to invest in stocks that are poised to gain from strong housing data.
Sales of New Homes and Existing Homes Rise
Sales of U.S. new single-family homes jumped 4% to a seasonally adjusted rate of 694,000 units in March. The rise was mainly due to a 28.3% increase in sales in the West, the highest level in almost 12 years. Moreover, the South, which accounts for the maximum number of new home sales, rose 0.8%. The Department of Commerce also revised the February sales pace to 667,000 units from the previously reported 618,000 units. This also indicates higher first-quarter demand than previously expected by analysts and economists.
Meanwhile, existing home sales too grew 1.1% on a month-over-month basis in March, suggesting that buyer sentiment is high despite the dwindling number of properties available in the market. Per NAR, existing homes sold in March on a seasonally adjusted annual pace of 5.60 million compared with 5.54 million in February. The robust growth can be attributed to impressive sales in the Midwest and Northeast, which was a reversal from the declines witnessed due to weather-related issues in February.
Housing Starts Rise, Homebuilder Confidence Remains Strong
Housing starts and building permits data too came in better-than-expected in March. Housing starts grew 1.9% to a seasonally adjusted rate of 1.319 million, surpassing expectations of 1.267 million. The surge can be attributed to a 3.7% jump in multifamily starts.
Also, building permits rose 2.5% to a rate of 1.354 million, surpassing expectations by 33,000. The strong data can be credited to robust growth in the West, with starts growing 34.2% through the first three months of 2018 on a year-over-year basis, while single-family starts grew 26.5%. The overall starts through the first three months of the year grew 8% compared with year-ago period.
That said, National Association of Home Builders (NAHB) Housing Market Index’s (HMI) latest reading is 69, 1 down from March. However, it is well above the 50 mark, which indicates a favorable outlook. It can thus be said that the sector is well on track to witness steady growth.
The latest data, which reflects a rise in sale of existing homes and new homes, is a clear indication that an increasing number of people are showing interest in buying homes. Strong demand for housing is also keeping builders optimistic about the future market conditions. Also, housing starts and building permits too saw impressive growth in March, which makes the industry outlook bullish.
Strong homebuilder confidence, increase in wages, higher number of jobs, greater spending power, unemployment level at a 17-year low and a bullish economic outlook are also signs that the housing market is on a steady growth path. Naturally, investing in stocks that are likely to gain from strong housing data looks like a good option at this point. We have narrowed down our search to the following stocks based on a good Zacks Rank and other relevant metrics.
Boise Cascade Company has a Zacks Rank #1 (Strong Buy). The company has expected earnings growth of 39.8% for the current year. The Zacks Consensus Estimate for the current year has improved by 3.9% over the last 30 days.
PGT Innovations, Inc. (PGTI – Free Report) pioneered the U.S. impact-resistant window and door industry and is today the country’s leading manufacturer and supplier of residential impact-resistant windows and doors.
The company has expected earnings growth of 40.2% for the current year. The Zacks Consensus Estimate for the current year has improved by 7.5% over the last 60 days. The stock has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Universal Forest Products has a Zacks Rank #1. The company has expected earnings growth of 39.7% for the current year. The Zacks Consensus Estimate for the current year has improved by 5.5% over the last 30 days.
Armstrong World Industries has a Zacks Rank #2 (Buy). The company has expected earnings growth of 19.6% for the current year. The Zacks Consensus Estimate for the current year has improved by 10.7% over the last 60 days.
The Sherwin-Williams Company has a Zacks Rank #2. The company has expected earnings growth of 33.9% for the current year. The Zacks Consensus Estimate for the current year has improved by 0.1% over the last 60 days.