Last week, the Census Bureau and the Department of Housing and Urban Development jointly announced that sales of new single-family houses jumped significantly in September 2017. According to the data, 667,000 new single-family houses were sold in September, 18.9% above the revised rate of 561,000 in August and 17% above the year-ago estimate of 570,000. The September 2017 data also represents a recovery from the 3.3% decline in new home sales in August 2017.
Sales were specifically strong in the Northeast and South which recorded increases of 33.3% and 25.8%, respectively, while the Midwest and the West witnessed increases of 10.6% and 2.9%, respectively.
The improvement in new home sales data comes as a relief considering economists were actually expecting a drop.
Meanwhile, after recording declines for three months, existing-home sales were up slightly (0.7%) in September, as per the National Association of Realtors (NAR). However, NAR reported that pending home sales remained flat in September.
Factors at Play
The biggest challenge for the housing market is low supply. Factors like rising lumber and land costs as well as tight labor supply and shortage of land have been hitting inventory build-up. Limited listings and rising prices have also been keeping home buyers at bay with many postponing their search for the time-being.
However, strong employment, income growth, growing interest from first-time homebuyers, and low inventory of new and existing homes are some of the factors that should support sustained growth in housing demand. Moreover, the sales shortfall resulting from the hurricanes should be recovered in 2018.
4 Stocks to Consider
The Home Builders segment enjoys a good Zacks Industry Rank (top 18% out of 256 industries). The industry has outperformed the broader market year to date as well.
Here is a look at four top-ranked housing stocks.
NVR, Inc. (NVR – Free Report) : NVR is one of the nation’s largest homebuilding and mortgage banking companies. The company sells and constructs homes under three brand names: Ryan Homes, NVHomes and Heartland Homes. NVR’s homebuilding business covers twenty-nine metropolitan areas across fourteen states and Washington, D.C.