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10 Best Housing Stocks to Buy Now

In this piece, we will take a look at the ten best housing stocks to buy now. If you want to jump ahead to the top five stocks in this list, then head on over to 5 Best Housing Stocks to Buy Now

A house is one of the biggest and most important purchases that most individuals without generational wealth or family homes will make. The housing industry itself is a crucial part of the economy, with the growth in construction tied to real estate development, which in turn often serves as a useful barometer of economic health due to the jobs that it generates.

This is why the housing sector, which most folks invest in through a real estate investment trust (REIT) or through buying shares of firms, is thought to be a stable investment with good dividend income. The ever increasing prices of homes also generate steady growth for this industry, and this trend is also visible in market research reports for the segment.

Almost all of these pegs the value of the real estate sector in the trillions of dollars, and the first one that we have for you today is from Allied Market Research. This firm estimates that the sector was worth $6.8 trillion in 2018, and between 2019 and 2026 it will grow at a compounded annual growth rate (CAGR) of 2.8%, enabling it to touch an outstanding value of $8.6 billion at the end of the forecast period.

Another report, from Research and Markets, takes a look at the global real estate market and estimates that it will be worth $5.85 trillion by the end of 2030, as it grows at a CAGR of 5.2% starting from this year. Driving this growth will be China, India, and Africa, as large segments of their populations start to earn sufficient incomes for a home purchase. Focusing on the housing market, in particular, the report cites the United Nations to report that the supranational body estimates that 65% of the world’s population will live in urban areas by 2030. This, in turn, will naturally drive up the demand for houses and other accommodations as well.

Finally, Danielle Hale, who is the chief economist at the real estate site Realtor.com, is also out with her latest take on the rental sector. A growing price for home purchases ends up increasing the value of the real estate market but it also reduces demand, which then in turn causes more people to live on rent. Ms. Hale estimates that urban areas are witnessing a faster (12.8%) growth in rent as compared to rural areas and that the rent for studio apartments is growing faster than that for multiple bedroom units. She also outlines that rent grew by 12.3% annually in July this year.

Looking at these details, we decided to sift out some of the top housing stocks for your consideration, and some that might end up catching your eye include Lennar Corporation (NYSE:LEN), Builders FirstSource, Inc. (NYSE:BLDR), and Lowe’s Companies, Inc. (NYSE:LOW).

Our Methodology

In order to pick out the top housing stocks for you to buy today, we took a broad look at the industry and the different companies that are operating in it. The firms were then sifted out through their performance and other important details, such as P/E ratios and CAGR growths. The stocks are ranked via Insider Monkey’s 895 hedge fund survey for the second quarter of this year.

10 Best Housing Stocks to Buy Now

10. LGI Homes, Inc. (NASDAQ:LGIH)

Number of Hedge Fund Holders: 17

LGI Homes, Inc. (NASDAQ:LGIH) is an American company that is headquartered in The Woodlands, Texas. The firm is primarily a homebuilder that is involved in the construction of entry level, active, and luxury homes. Additionally, it also sells homes wholesale to companies looking to put them out on rent.

LGI Homes, Inc. (NASDAQ:LGIH) is one of the strongest growing home companies out there, as the firm’s book value, which is a measure of its total worth, has grown by a whopping 28% CAGR since 2016 – indicating that as the years have passed, the company has been able to build more homes. It also has the highest turnover in the industry, being able to build a house from scratch in 60 days as opposed to the 90-180 day industry average, which allows for a high turnover. LGI Homes, Inc. (NASDAQ:LGIH) also has a unique business model which sees it directly scout the market for home interest before starting its building activities.

JMP Securities reduced LGI Homes, Inc. (NASDAQ:LGIH)’s share price target to $140 from $175 in August 2022, even as it called the firm’s Q2 earnings report “exceptional”. 17 out of the 895 hedge funds polled by Insider Monkey during Q2 2022 had invested in the company.

Out of these, Kerr Neilson’s Platinum Asset Management is LGI Homes, Inc. (NASDAQ:LGIH)’s largest investor. It owns 414, 391 shares that are worth $36 million.

Carillon Tower Advisers mentioned the company in its Q1 2022 investor letter, outlining that:

LGI Homes (NASDAQ:LGIH) builds homes in 18 states with a focus on the entry-level homebuyer. The company focuses on renters and has move-in ready inventory. The stock has benefited over the past year as the pandemic, low interest rates, and limited supply have driven demand for standalone housing. During the quarter management lowered guidance for future closings and gross margin, leading the stock to struggle.”

Along with Builders FirstSource, Inc. (NYSE:BLDR), Lennar Corporation (NYSE:LEN), and Lowe’s Companies, Inc. (NYSE:LOW), LGI Homes, Inc. (NASDAQ:LGIH) is a hot housing stock.

9. PulteGroup, Inc. (NYSE:PHM)

Number of Hedge Fund Holders: 19

PulteGroup, Inc. (NYSE:PHM) is an American homebuilder that was set up in 1950 and is headquartered in Atlanta, Georgia. The company is involved primarily in buying land for homebuilding, and it offers its customers several designs to choose from for their future homes.

PulteGroup, Inc. (NYSE:PHM) managed to grow its gross margins during its first quarter at a time when the housing market was believed to have entered a slowdown as its earnings revealed that gross margins stood at 29% over last year’s 25.5%. The company also has a fortress balance sheet, with its total assets being 3x its total liabilities – indicating a healthy financial structure. Finally, PulteGroup, Inc. (NYSE:PHM)’s dividends have grown at a 12% CAGR since 2013 – outstripping industry peers. It currently pays a $0.15 dividend for a 1.47% yield.

BofA kept PulteGroup, Inc. (NYSE:PHM)’s share price unchanged at $82 in August 2022 outlining that the firm has some exposure to risky areas. Insider Monkey took a look at 895 hedge funds for their second quarter of 2022 holdings and discovered that 19 had invested in the company.

PulteGroup, Inc. (NYSE:PHM)’s largest investor is Natixis Global Asset Management’s Harris Associates which owns 4.8 million shares that are worth $191 million.

Miller Value Partners mentioned the company in its Q2 2022 investor letter. Here is what the fund said:

“Homebuilders and financials, the worst losers during the Financial Crisis crash, plummeted. Some homebuilders, like PulteGroup, Inc. (NYSE:PHM), traded down to half their financial crisis lows despite reporting housing improvements for the first time. Fear ruled in the short term, but fundamentals ultimately prevailed. Homebuilders were top performers in 2012 posting triple-digit increases in some cases. Opportunity Equity was a top performer that year.”

8. Redfin Corporation (NASDAQ:RDFN)

Number of Hedge Fund Holders: 19

Redfin Corporation (NASDAQ:RDFN) is a real estate technology company that operates an online real estate platform allowing buyers to make their home purchases. The firm is headquartered in Seattle, Washington, United States.

Buy the low but sell the high is the mantra with Redfin Corporation (NASDAQ:RDFN). The firm’s disappointing recent quarterly results have caused many to question its viability, but a closer look reveals that the company is making progress in crucial segments. One of these is its Redfin Mortgage service, which offers a host of services to buyers on its platforms. Buyers using this platform surged by 11% and 15% in June and July 2022, more than doubling the previous growth record. There are several potential catalysts present for the stock as well, including management targets of a positive operating income next year and plans to phase out commission rebates by January 2023.

Stifel lowered Redfin Corporation (NASDAQ:RDFN)’s share price target to $9 from $10 in August 2022, as it reduced its revenue growth estimates for the firm to 24% from 29% in light of recent macroeconomic events. 19 of the 895 hedge funds part of Insider Monkey’s survey for this year’s June quarter had bought the company’s shares.

Brian Bares’s Bares Capital Management is Redfin Corporation (NASDAQ:RDFN)’s largest investor. It owns 19.8 million shares that are worth $163 million.

Saga Partners mentioned the company in its Q1 2022 investor letter, and it stated that:

Because Redfin is a low-cost provider, it has a relative advantage over traditional brokerages. No other real estate brokerage has lowered or attempted to lower the costs of transacting real estate in a similar way. This cost advantage provides Redfin with options about how to share these savings on each transaction. Redfin has primarily shared the cost savings with customers by charging lower commission rates than traditional brokerages. By offering a similar, if not superior, service to customers compared to other brokerages yet charging lower fees, it naturally attracts further demand which then provides Redfin with the ability to scale fixed costs per transaction even more, further widening their cost advantage to other brokerages.

7. UDR, Inc. (NYSE:UDR)

Number of Hedge Fund Holders: 27

UDR, Inc. (NYSE:UDR) is an S&P 500 real estate investment trust (REIT) that has been in business for almost 50 years and is headquartered in Highlands Ranch, Colorado, United States. The firm buys, holds, develops, and redevelops a host of real estate properties in America.

UDR, Inc. (NYSE:UDR) is one of the largest apartment complex owners in the U.S., with close to 57,000 apartments all over the country. This lends it a crucial advantage during these times as housing prices go up and more people stick with renting. The firm’s credibility is further bolstered by the fact that the income for its resident base is more than 170% higher than the average income for the areas and their rent to income ratio is less than 20%. UDR, Inc. (NYSE:UDR)’s assets outstrip its liabilities by 3x and the firm pays a 38 cent dividend for a 3.33% yield.

Morgan Stanley increased UDR, Inc. (NYSE:UDR)’s share price target to $54 from $47 in August 2022 as its stated that revenues will grow next year. Insider Monkey’s Q2 2022 survey revealed that 27 out of 895 hedge funds had bought the company’s shares.

UDR, Inc. (NYSE:UDR)’s largest investor is Jeffrey Furber’s AEW Capital Management which owns 2 million shares that are worth $98 million.

6. Invitation Homes Inc. (NYSE:INVH)

Number of Hedge Fund Holders: 27

Invitation Homes Inc. (NYSE:INVH) is a single family home leasing company that is headquartered in Dallas, Texas, United States. The firm provides families with homes that are located close to populations and with features of their choice.

Invitation Homes Inc. (NYSE:INVH) has a large rental home portfolio that consists of 80,000 units, making it one of the largest companies of its kind. These are located in solid locations and the average value of these homes is $400,000. Additionally, its properties have a 98% occupancy rate, indicating that its investments are not sitting idle. Finally, Invitation Homes Inc. (NYSE:INVH) also pays a 22 cent dividend for a 2.39% yield.

Barclays set a $39 price target for the company in July 2022, stating that it expects a strong performance from the firm’s rental segment in the future. 17 out of the 895 hedge funds polled by Insider Monkey for their June 2022 holdings had held a stake in Invitation Homes Inc. (NYSE:INVH).

Greg Poole’s Echo Street Capital Management is Invitation Homes Inc. (NYSE:INVH)’s largest investor. It owns a $136 million stake that comes courtesy of 3.8 million shares.

Invitation Homes Inc. (NYSE:INVH) joins Lennar Corporation (NYSE:LEN), Builders FirstSource, Inc. (NYSE:BLDR), and Lowe’s Companies, Inc. (NYSE:LOW) in our list of some of the best housing stocks that you should take a look at.

Click here to continue reading and see 5 Best Housing Stocks to Buy Now.

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Disclosure: None. 10 Best Housing Stocks to Buy Now is originally published on Insider Monkey.

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