With low interest rates on the horizon, now is a great time to consider the best home builder stocks for 2024. The homebuilding sector continues to show promising signs, and discerning investors are eyeing the potential to generate outsized returns.
During the pandemic, investors saw a balloon in home prices across the country. This was primarily driven by fiscal stimulus and ultra low interest rates. However, easy money fed policies would ultimately spike inflation, later fostering the tightening of financial conditions.
Despite a drastic shift in macroeconomic policies and a general slowdown in home buying, home prices have still remained relatively elevated. Due to the supply/demand imbalance, the United States is facing a shortage in available homes to the tune of 3.2 million. With an urgent need to build more homes, these three companies are looking to capitalize on the U.S. housing shortage.
Now, let’s discover the three best home builder stocks to buy for 2024!
D.R. Horton (DHI)
D.R. Horton (NYSE:DHI) is certainly one of the best home builder stocks to buy for 2024. They remain the largest homebuilder in the U.S. by volume, and the outlook for this year looks very strong.
Over the last year, investors have become skeptical about the housing market amid inflation and higher mortgage rates. Demand has certainly softened from the pandemic peak, but the supply of new and existing homes remains limited. This is good news for D.R. Horton, as net sales surged 35% YOY in their latest quarterly results.
In Q1 FY24, revenue increased 6% YOY to $7.7 billion. Net income was $947 million, or $2.42 per share. When looking at the results at face value, there was nothing spectacular that was reported. However, the underlying business fundamentals and outlook on the housing market tell a different story. Net sales for new homes increased 35% YOY, with homes closed increasing 12% respectively. The company’s liquidity is strong, and net new homes closed could increase rapidly with lower mortgage rates in the back half of 2024.
Lennar Corp (LEN)
Lennar Corp (NYSE:LEN) is an American home construction company headquartered in Miami, Fla. They’re currently the second largest home building company in the U.S.
It is without a doubt that homebuilding stocks will continue to outperform the market for the foreseeable future. Over the last five years, Lennar Corp has far outpaced the S&P 500. That is set to continue, as the U.S. is currently in the midst of a housing shortage. Furthermore, Lennar Corp is currently capitalizing on this trend as net new orders increased 13% to 69,111 homes in the 2023 fiscal year.
In Q4 2023, revenue increased 8% YOY to $11 billion. EPS increased 6% to $4.62 per share. Home buyers continued to respond favorably to incentives, as trends remained positive despite higher mortgage rates. During the quarter deliveries increased 19% to 23,795, with a current backlog of 14,892 homes. Demand continues to outway supply, and investors can expect robust operational efficiency in FY24.
PulteGroup (NYSE:PHM) is last but not least one of the top considerations for the best home builder stocks to buy for 2024. The company has built more than 750,000 homes since its inception, and is the third largest home builder in the U.S.
The current macroeconomic climate has negatively affected the entire construction industry as a whole. However, home buying activity has remained strong due to the current supply/demand imbalance. PulteGroup growth was flat for 2023, but management is bullish on the 2024 outlook given a strong job market and lower interest rates.
In Q4 2023, net new orders for homes increased an astonishing 57% to 6,212 homes. Home sale gross margins were 28.9%, with a unit backlog of 7,615 homes reflecting a value of $7.6 billion. With lower interest rates on the table in 2024, limited inventory is a positive growth tailwind for PulteGroup. With a $1.5 billion increase to share repurchase authorization, their strong liquidity instills confidence in shareholders moving forward. This makes PulteGroup one of the best home builder stocks to buy for 2024.
On the date of publication, Terel Miles did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.