Since the pandemic, housing has been one of the strongest parts of the economy with home prices well above pre-pandemic levels. Housing has been in expansion mode since 2012 with the major factors being low rates, a growing economy, and low inventories.
The pandemic led to a surge in demand with people looking to move from urban areas to the suburbs or rural areas with remote work and schooling, while rates and inventories remained low, causing a spike in prices. In 2021, the housing market cooled off but still, the underlying fundamentals remain supportive. Further, some of the cost increases which led to a slowdown in activity have also improved such as lumber prices.
If we look at housing stocks, many homebuilders are starting to break out after being in consolidation mode. In addition, some of the leading areas of the housing market like building supply companies have been posting strong earnings and have already broken out to new highs.
This is even more impressive given that the market has been in the risk-off mode for much of the past month. However, the drop in longer-term rates is a positive tailwind for the sector. Here are 3 housing stocks that investors should watch:
Hovnanian
Louisiana Pacific
Skyline Champions