The recent rise in interest rates has slowed down the housing recovery. With the recent improvement in economic conditions and the housing market in general, mortgage rates are edging upwards to more normalized levels since May. High interest rates dilute the demand for new homes, as mortgage loans become expensive; thus lowering a buyer’s purchasing power. Accordingly, the sharp increase in interest rates shocked many customers and a few put off their purchase decision; thus increasing cancellation rates and lowering new home orders.
However, though interest rates have started increasing lately, they are still below historical levels and housing is still affordable. Thus, historically-low interest rates, accelerating job growth and increasing consumer confidence are keeping the demand for new homes steady. Supply, however, remains limited by low home inventories, both for new and existing ones.
In order to meet this supply shortfall, homebuilders like The Ryland Group Inc. (RYL) continue to offer new homes/communities.
Recently the company opened a new section called Eastlake at its high end community Gleannloch Farms. Homes at Eastlake cover an area of 2,340-3,478 square feet and are priced in the $280,000 range. With easy access to notable cities, these homes come with a host of amenities including hiking and biking trails, swimming pools and playgrounds, a golf course, tennis courts, an equestrian center and a lakeside aquatic center.
Indeed, the company has added a number of new communities to its portfolio this month. Ryland unveiled new homes at Acacia at Cypress Village, priced in the mid $400,000 range on Nov 21. In the same week, the company disclosed new single-family homes at Windett Ridge in Yorkville, Ill. priced from $170,000 onwards. Prior to that, the national homebuilder unveiled townhomes at Somerton Valley in Bensalem, Pa.
These back-to-back openings accompanied with strategic acquisitions of Charlotte, Dallas, Philadelphia, Phoenix and Raleigh operations, as well as ongoing land acquisitions in its existing markets would boost the company’s market share while positioning it for future growth.
Like Ryland, other homebuilding companies are also focusing on making investments to build new homes. Recently, KB Home (KBH) announced the opening of the Arbor Rose community in Arcadia, an enclave of 34 homes.
The Ryland Group presently has a short-term Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include M/I Homes, Inc. (MHO) and Meritage Homes Corporation (MTH). Both these stocks hold a Zacks Rank #2 (Buy).
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