In this article, we will analyze the housing industry while discussing the 10 best home builder stocks to buy now.
Lowering Mortgages: A Sigh of Relief for the Housing Market?
Mortgage rates have dropped for six straight weeks to their lowest since February 2023 as the 30-year fixed-rate mortgage averaged 6.20% in the week ended September 12. While many experts believe that these rates will be in the 5% range by 2025, the gesture seems to be motivating for all those looking to buy a house but have long been priced out of the market. In an interview with CNBC, Bess Freedman, CEO of Brown Harris Stevens, mentioned how the anticipated Fed rate cut could be beneficial for the housing market but its effect would unfold gradually. The long-awaited move is also likely to help sellers escape the mortgage lock-in effect and finally put their houses on the market. The mortgage lock-in effect refers to existing homeowners holding onto their houses since they will have to pay a higher rate on a new house.
Diane Swonk, KPMG chief economist, talked about the downside of this positive news with CNBC saying that it couldn’t spur buyer activity a lot. In the existing housing market, there is a lot of pent-up demand especially with 12,000 millennials a day turning 35 and moving into their peak home-buying years. Many buyers are still waiting for mortgage rates to go even lower in the hopes of the Fed rate cut. Other than that, home affordability being at its worst since 2006 is further pushing out potential buyers. The root cause in this case remains decades of under-building which has restricted the prevailing supply. According to Swonk, the US zoning laws need to be rethought to solve this housing crisis
Therefore, homebuyers and homeowners in the current tight housing market tend to see a welcome sign in the form of lowering mortgage rates ahead of the rate cuts from the Federal Reserve. However, the market continues to be plagued with persistent supply shortages and affordability issues.
With that being said, let’s move to the 10 best home builder stocks to buy now.
Aerial view of a neighborhood with newly constructed single-family detached homes.
Our Methodology:
In order to compile a list of the 10 best home builder stocks to buy now, we first used a stock screener to make an extended list of the relevant companies with the highest market caps. Moving on, we shortlisted the top 10 stocks from our list which had the highest number of hedge fund holders. The 10 best home builder stocks to buy now have been arranged in ascending order of their hedge fund holders, as of Q2 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Home Builder Stocks To Buy Now
10. Taylor Morrison Home Corporation (NYSE:TMHC)
Number of Hedge Fund Holders: 27
Taylor Morrison Home Corporation (NYSE:TMHC) is an Arizona-based homebuilder and developer. The company has operations across 20 markets in 12 states and satisfies the needs of diverse consumers including first-time, move-up, luxury, and resort lifestyle homebuyers. It also engages in the development of lifestyle-oriented horizontal apartment communities to cater to the needs of rental households. The firm’s financial services segment offers mortgage financing, title services, and homeowners’ insurance.
The home builder has a company legacy that dates back over 100 years. Its footprint spans some of the highest-growth markets and prime locations across the United States. Taylor Morrison continues to leverage the strength and stability of its strategically diversified consumer and geographic strategy to deliver results while mitigating risks. The firm has a leading national, regional, and local scale with top 10 positions in 17 of 20 markets. Additionally, it has significant financial flexibility to deliver shareholder returns while investing in growth.
Taylor Morrison Home Corporation (NYSE:TMHC) delivered a solid performance during the fiscal second quarter of the year. The home builder saw its closings volume and home closings gross margin exceed its expectations. Furthermore, the company’s management forecasts continued growth and positive momentum in the business following the long-awaited Fed rate cuts.
The company looks in a good position to take advantage of the strong housing fundamentals in the coming years. As of Q2, Taylor Morrison Home Corporation (NYSE:TMHC) is held by 27 hedge funds with Balyasny Asset Management as the largest shareholder in the company.
9. Champion Homes, Inc. (NYSE:SKY)
Number of Hedge Fund Holders: 28
Champion Homes, Inc. (NYSE:SKY) serves as one of the biggest homebuilders in North America. The company has over 70 years of experience in building manufactured housing. It has 48 manufacturing facilities throughout the United States and western Canada. Apart from the core home-building business, the firm provides construction services for installing and setting up factory-built homes. It operates a factory-direct retail business with 72 US retail locations while offering transportation services to manufactured housing and other industries.
The business strategies of Champion Homes, Inc. (NYSE:SKY) are proving to sustain its market leadership position. Other than pursuing organic and acquisition strategies, the company is enhancing the customer’s digital experience by enabling them to design, shop, and price homes online. It is also investing in production automation technology to improve product yield and quality. Furthermore, the market demographic trends seem to align in the company’s favor since 60% of the US population cannot afford a traditional home. Furthermore, millennials and baby boomers are the fastest-growing age segments while accounting for 70% of manufactured home sales.
For the first quarter of fiscal 2025, the company saw growing sales and backlog which reflected an increase in demand for its homes. Net sales increased 35.1% year-over-year. The home builder had $548.9 million of cash and cash equivalents, as of June 29, with an increase of $53.9 million in the current quarter.
The home builder’s dominant position in North America, industry-leading family of brands, investments in growth strategies, and material financial results make it promising. As of 2024’s second quarter, the stock is held by 28 hedge funds and ranks 9th among the 10 best home builder stocks to buy now. MAK Capital One is the largest shareholder in the firm.
8. Cavco Industries, Inc. (NASDAQ:CVCO)
Number of Hedge Fund Holders: 32
Cavco Industries, Inc. (NASDAQ:CVCO) is a leading manufactured home builder in the US. The company has some of the recognized brand names in the industry including Cavco Homes, Fleetwood Homes, Palm Harbor Homes, Nationwide Homes, Fairmont Homes, Friendship Homes, Chariot Eagle, and Destiny Homes. The firm’s insurance group provides insurance products for manufactured home owners and its finance subsidiary offers homebuyer financing options.
Cavco Industries, Inc. (NASDAQ:CVCO) has built a decades-old legacy for itself. The company has been shaping the manufactured home industry as a leader in innovation and construction techniques. For six decades, it has been bringing high-quality, luxurious homes to buyers while acquiring the status of one of the largest producers of manufactured homes in the market. The company brands have showcased success
The momentum that the firm had experienced in the fourth quarter was successfully carried through the first quarter. For this quarter, the firm witnessed increasing orders, production increases, and a growing backlog. Although Cavco’s factory-built housing results continue to improve, its consolidated results were negatively affected by high claims costs in its insurance operations, for which the firm is actively managing exposure.
The repute and strong market position of the home builder is evident from the fact that half a million families have enjoyed a Cavco manufactured home. As of Q2, Cavco Industries, Inc. (NASDAQ:CVCO) is held by 32 hedge funds. Broad Bay Capital is the most prominent shareholder in the company.
7. Meritage Homes Corporation (NYSE:MTH)
Number of Hedge Fund Holders: 33
Meritage Homes Corporation (NYSE:MTH) is the 5th largest American homebuilder based on the homes closed in the year 2023. The home builder provides energy-efficient and affordable entry-level and first-move-up homes. It operates in multiple states including Arizona, California, Colorado, Utah, Texas, Florida, Georgia, North Carolina, South Carolina, and Tennessee.
The company has a long history of home building. It has successfully delivered 185,000 homes during its 38 years in business. Other than being well-reputed for its quality construction and distinctive style, the firm is an industry leader in energy-efficient homebuilding. The current competitive advantage of Meritage Homes Corporation (NYSE:MTH) is the available supply of quick turning move-in ready homes.
With the highest second-quarter closings and the highest second-quarter orders volume of 3,799 homes, the firm outperformed during the recent quarter. Home closing revenue climbed 10% year-over-year to $1.7 billion. Amidst prevailing housing conditions in the country, the firm’s focus on affordable move-in ready inventory enables the home builder to accelerate its growth. Overall, the year’s first half went well with increasing total sales orders and home closing revenue.
The quick turning move-in ready homes strategy, strong balance sheet, and prioritizing pace over price has positioned Meritage Homes Corporation (NYSE:MTH) for growing its market share. As of 2024’s second quarter, the stock is held by 33 hedge funds. Citadel Investment Group serves as the most dominant shareholder in the company.
6. PulteGroup, Inc. (NYSE:PHM)
Number of Hedge Fund Holders: 35
PulteGroup, Inc. (NYSE:PHM) is one of America’s leading homebuilders which was founded in 1950 and has delivered almost 750,000 homes across the nation. With operations in over 40 major cities, the company has grown to become one of the largest US homebuilders. The homebuilder meets the needs of first-time, move-up, and active-adult homebuyers through its brands including Pulte, Centex, Del Webb, DiVosta, American West, and John Wieland Homes and Neighborhoods. Through its financial services segment, the company also provides mortgage financing and title agency services.
PulteGroup serves as one of the industry leaders which is uniquely positioned to serve buyers at every stage of their lives. The Del Webb and DiVosta brands are the recognized leaders in serving over 55 buyers. Simultaneously, first-time homebuyers can seek value for their money in a Centex home and the luxury homebuilder John Wieland Homes and Neighborhoods offers new construction and neighborhoods in some of the most desirable locations. Over the past 5 years, Pulte has delivered higher returns and significantly stronger cash flows despite a slower growth trajectory.
2024 has proved to be a good year for PulteGroup, Inc. (NYSE:PHM) as the homebuilder continues to start homes at a pace that is consistent with closing 31,000 homes this year. Highlights from the firm’s second quarter include closings increasing by 8% to 8,097 homes, average sales price increasing by 2% to $549,000, and home sale gross margin increasing by 30 basis points to 29.9%. This rise in closings, average sales price, and gross margin resulted in a 19% rise in earnings.
The firm’s market position is backed up by its diversified portfolio, robust delivery and financials, strong cash flows, and the existing industry environment. Additionally, PulteGroup, Inc. (NYSE:PHM) is currently trading at 11 times its forward earnings, a discount of 34.36% to the sector. As of Q2, it is held by 35 hedge funds while Greenhaven Associates is the most prominent shareholder in the company.
5. Tri Pointe Homes, Inc. (NYSE:TPH)
Number of Hedge Fund Holders: 35
Tri Pointe Homes, Inc. (NYSE:TPH) is one of the largest home builders in the United States. Regardless of the price point or life stage, the company creates homes and neighborhoods to offer a premium lifestyle to its customers. The homebuilder has operations in 12 states and the District of Columbia.
Tri Pointe Homes, Inc. (NYSE:TPH) is a recognized leader in innovation, energy efficiency, and environmentally friendly home designs. The home builder operates as local specialists on a national scale. It has a diversified portfolio of markets across the US which represents a broad market reach. The firm has a major supply of high-quality land assets in strong housing markets. To expand revenues, it leverages the long-standing relationships with local land owners and subcontractors in its local markets.
While the home builder focuses on expanding scale in existing markets while creating a foundation for growth in new markets, it drives a commendable performance. With a 38% year-over-year increase in home sales, the firm closed a successful second quarter. Net income and diluted earnings per share witnessed a rise of 94% and 108%, year-over-year, respectively.
Tri Pointe Homes, Inc. (NYSE:TPH) serves as a growth company with local market expertise and national reach as well as a strong balance sheet. As of Q2, the stock is held by 35 hedge funds thereby ranking as a top home builder stock to buy now. The largest shareholder in the firm is Balyasny Asset Management.
4. Toll Brothers, Inc. (NYSE:TOL)
Number of Hedge Fund Holders: 46
Toll Brothers, Inc. (NYSE:TOL) was founded by the brothers Bob and Bruce Toll in southeastern Pennsylvania in 1967. The firm expanded across the US over the years and emerged as America’s luxury home builder currently building in 24 markets nationwide. Toll Brothers, Inc. (NYSE:TOL) is also a Fortune 500 company that has been recognized as one of the top home builders multiple times.
The home builder’s national footprint positions it in an attractive place for growth. The growth prospects are even stronger as it has the widest variety of products and the widest range of prices of any of the builders. In the words of the builder, there are a number of advantages that sets it apart including prestigious and desirable locations to build in, distinctive architecture, unrivaled choice, and exceptional customer service.
Recently, Toll Brothers generated a record third-quarter home sales revenue of $2.72 billion. The firm’s strong markets included New Jersey, Pennsylvania, Metro DC, South Carolina, Atlanta, Boise, Las Vegas, and all of California. Additionally, the builder forecasts the market conditions to remain positive backed up by low mortgage rates and supply-demand imbalance. Toll’s luxury move-up business will also benefit from older millennials hitting their 40s over the next decade. As baby boomers retire, they are also looking for new homes.
In a housing market long been subject to elevated mortgage rates, Toll Brothers has managed to bring its sales up 25% year-to-date. The firm remains on target to achieve its goal of operating from 410 communities by the year-end. The aforementioned competitive advantages, supportive demographics, and a healthy balance sheet with low net debt deem Toll Brothers, Inc. (NYSE:TOL) an interesting investment. As of Q2, the stock is held by 46 hedge funds with Greenhaven Associates as its largest shareholder.
3. NVR, Inc. (NYSE:NVR)
Number of Hedge Fund Holders: 47
NVR, Inc. (NYSE:NVR) is an American home builder headquartered in Reston, Virginia. The firm operates in 16 states which include Maryland, New York, North Carolina, Virginia, Ohio, Indiana, Illinois, South Carolina, Pennsylvania, Tennessee, Georgia, Florida, Delaware, West Virginia, New Jersey, and Kentucky as well as Washington DC. It sells homes under three brand names including Ryan Homes, NVHomes, and Heartland Homes. The firm also operates a mortgage subsidiary for its home buyers whereas the NVR Settlement Services subsidiary offers settlement and title services.
Historically, NVR, Inc. (NYSE:NVR) has been one of the market leaders in each of the markets where it builds homes. This has enabled the firm to achieve competitive advantages while getting to enjoy the growth opportunities within these markets. The firm’s financial performance is a testament to its market-leading position. It has grown its top line by 8.81% and its bottom line by 19.64% over the past decade.
The company’s segments ‘homebuilding’ and ‘mortgage banking’ remain its strength. During the year’s second quarter, homebuilding revenues increased by 12% from $2.28 billion in 2023’s same quarter to $2.55 billion in this quarter. Income before tax from the homebuilding segment rose 12% while income before tax from the mortgage banking segment climbed 23% year-over-year.
As of Q2, the firm is held by 47 hedge funds thereby ranking on our list of the best home builder stocks to buy now. Diamond Hill Capital is the top shareholder in the company.
2. Lennar Corporation (NYSE:LEN)
Number of Hedge Fund Holders: 60
Lennar Corporation (NYSE:LEN) has built over one million new homes in the United States since 1954. The company constructs affordable, move-up, and active adult homes under the Lennar brand name. It offers mortgage financing, title, and closing services under its Financial Services segment while mortgage loans are originated by LMF Commercial. Simultaneously, Lennar’s Multifamily segment develops high-quality multifamily rental properties.
With 70 years of operation, Lennar now qualifies among the nation’s largest builders of quality homes. Homebuilding operations are the most substantial part of Lennar’s business and generated $33 billion in revenues in fiscal 2023. The company continues to drive momentum through 2024. Although interest rates rose most of the second quarter, the home builder remained resilient and performed well. A 19% increase in new orders and a 15% increase in deliveries year over year was witnessed. In home building, revenues increased 9% to $8.4 billion as compared to $7.6 billion in the prior-year period.
Over the past 5 years, the homebuilder has successfully expanded its net income by 16.75% and its revenue by 10.66%. The status of a leading American homebuilder, the capability of building affordable housing in strategic markets that cater to the existing housing shortage, resilience against the external environment, and a strong balance sheet are factors that make Lennar Corporation (NYSE:LEN) one of the best home builders. The stock is held by 60 hedge funds, as of 2024’s second quarter.
1. D.R. Horton, Inc. (NYSE:DHI)
Number of Hedge Fund Holders: 62
D.R. Horton, Inc. (NYSE:DHI) is an American home construction company that sells homes in 113 markets across 33 states. The company started off with its first home in 1978 and completed over 1,000,000 homes in 2023. Other than homebuilding, the homebuilder offers other services such as mortgage, title, and insurance. The homebuilder has Express Series for first-time homebuyers, Emerald Series for high-end homes, and Freedom Series for easy living and low maintenance. Rental communities for those who cannot own a home are also available.
D.R. Horton, Inc. (NYSE:DHI) has a clear dominance in the home building market as it has been the largest home builder by volume since 2002. The market share dominance is evident from the fact that the company served as the largest builder in 3 of the top 5 US housing markets and in 52 of the 118 markets in which it operated on September 30, 2023. During the trailing twelve months ended June 30, the firm closed 94,255 homes. The diverse product offerings and price points also offer a competitive advantage.
Apart from the market dominance, the track record of commendable financial performance remains strong. The fiscal third quarter of 2024 is a recent proof. The firm recorded earnings of $4.10 per diluted share, up 5% from the prior year period. The consolidated revenues increased 2% to $10.0 billion and consolidated pre-tax income increased 1% to $1.8 billion. Home sales revenues of $9.2 billion were secured on 24,155 homes closed in the quarter. With affordable product offerings and flexible lot supply in a supply-deficient market, D.R. Horton, Inc. (NYSE:DHI) continues to position itself well in the market.
Based on a market-leading position, strong financial performance, and a strategy that aligns with the market demographics, DHI ranks among the 10 best home builder stocks to buy now. The stock was held by 62 hedge funds, as of Q2 2024. Greenhaven Associates was the largest shareholder in the company.
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