Two sets of data released last week suggest that the U.S. housing recovery is still on track. Existing home sales numbers touched their highest level for the year. Additionally, sales of new home sales hit a six-year high, reinforcing the view that better days are ahead for the housing sector.
Existing Home Sales Jump
Existing home sales rose at a pace of 2.4% in September from August to a seasonally adjusted annual rate of 5.17 million. The sales figure also came in ahead of consensus estimate of 5.09 million. This was the highest rate recorded so far this year.
A relatively weak period in August had led market watchers to question whether the recovery was slackening. These numbers indicate that housing purchases are improving once again. Additionally, interest rates are at record low levels. An improving jobs market has also boosted consumer confidence.
New Home Sales Impress
Data on new home sales was also encouraging. New home sales increased 0.2% in September to seasonally adjusted annual rate of 467,000. However, this rise in new home sales was less than the consensus estimate of an increase to 471,000. At the same time, data for August was revised sharply downward. August numbers were revised from the initial estimate of 504,000 to 466,000.
But at the same time, sales of new homes touched a six-year high in September. September sales also improved 17% year on year. New home sales data often varies widely from month to month. This is why a long term view is a better indicator of the housing sector. In the third quarter, average new home sales came in at 446,000. This is 15% higher than the same period in 2013.
Our Choices
Below we present three stocks which will gain from these trends, each of which also has a good Zacks rank.
Boise Cascade Company (BCC) manufactures wood products and distributes building materials. The company has operations across both the U.S. and Canada. Boise has two operating segments, wood products and building materials. The company produces particleboard, plywood, lumber and engineered wood products. It also distributes a range of building materials. This includes wood products produced by Boise’s wood products division.
Boise Cascade holds a Zacks Rank #1 (Strong Buy) and has expected earnings growth of 58.6%. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 18.17.
PGT, Inc. (PGTI) supplies and manufactures impact-resistant windows and doors for residential homes. PGT’s impact-resistant products are marketed under three brand names. These are: PremierVue, PGT Architectural Systems and WinGuard. The company’s products use a combination of aluminium or vinyl frames and laminated glass. Such products provide protection against hurricanes and debris carried by such winds.
Apart from a Zacks Rank #1 (Strong Buy), the company has expected earnings growth of 6.4%. It has a P/E (F1) of 20.94x.
NVR, Inc. (NVR) is a homebuilding company. NVR constructs and sells single family detached homes, condominiums and townhomes. These are marketed under the following brand names: Fox Ridge Homes, Ryan Homes, NVHomes and Rymarc Homes. NVR’s homebuilding operations are conducted directly. The company also offers mortgage banking and title services through a subsidiary company called NVR Mortgage Finance, Inc.
NVR, Inc. holds a Zacks Rank #2 (Buy) and has expected earnings growth of 19.9%. It has a P/E (F1) of 18.34x.
Recent numbers indicate that the housing sector continues to undergo a steady recovery. Declining unemployment and improving economic growth is expected to boost this recovery in the days ahead. This is why these stocks would make good additions to your portfolio.
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