Despite Lennar Corporation (NYSE:LEN)’s high valuation, its CEO Stuart Miller remains positive: “Against the backdrop of recent investor concerns over mortgage rate increases, we believe that our second-quarter results together with real time feedback from our field associates continue to point towards a solid housing recovery,” he said.
Toll Brothers Inc (NYSE:TOL), one the nation’s premier builders of luxury homes and Lennar’s most important rival, has experienced most of its recovery before this year while other home builders are just now catching up. Toll Brothers Inc (NYSE:TOL) reported its fiscal second-quarter profit rose 50%, as the luxury home builder also reported revenue growth well above Wall Street’s expectations.
Furthermore, as opposed to other home builders, luxury home builders such as Toll Brothers Inc (NYSE:TOL) and KB Home are not as sensitive to rate changes. Moreover, Toll is heavily engaged in five markets showing high price increases, including Atlanta, Las Vegas, Detroit, Dallas and Minneapolis. Lastly, Toll is a highly diversified company utilizing a business strategy that purchase and develops country clubs and golf courses with land attached, which is where it builds its luxury homes.
KB Home (NYSE:KBH), the Los Angeles-based home builder and the largest home builder in the Golden State, has been doing really well during the housing market recovery. Although not competing head-to-head with Toll and Lennar, KB Home (NYSE:KBH) had the largest percentage rise in average selling prices among its peers in the past several quarters and it is likely to repeat performance.
KB Home (NYSE:KBH) recently announce it is going to include cutting edge technology in new homes, the Wiser home management system, which allow homeowners to track their home’s energy consumption in real time.
The Foolish bottom line
Despite that fact that many analysts believe the housing recovery is unsustainable, I certainly believe the housing recovery is solid and widespread and we are only in its early innings. My favorite housing stocks are KB Home (NYSE:KBH), Toll Brothers Inc (NYSE:TOL) and Lennar, out of which Lennar Corporation (NYSE:LEN) stands out. The companies present strong growth and are not sensitive to rising interest rates. Moreover, assuming the economy will continue its comeback, more people will buy houses, and perhaps this time not only will Wall Street enjoy recovery but the average Joe will be rebuilding America.
The article How to Play the Housing Market Recovery originally appeared on Fool.com and is written by Yaniv Hirsch.
Yaniv Hirsch has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Yaniv is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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