PulteGroup, Inc. (PHM), Toll Brothers Inc (TOL), Lennar Corporation (LEN): Are Homebuilders Ripe for Investment?

Not surprisingly, mortgage rates have followed suit. According to Bankrate, 30-year mortgage rates sit above 4.5% after declining well below 4% for most of the past few years.

Despite headwinds, housing outlook remains strong
The crimp in housing affordability due to rising home prices and climbing interest rates may indeed slow housing activity over the coming months.

At the same time, those conditions underscore an improving housing market overall, which is clearly a good thing for the homebuilders.

These homebuilder stocks are reporting excellent growth in revenue and profits and are doing an admirable job of improving their balance sheets and buying back stock.

The headwinds facing the housing sector seem to be somewhat reflected in the stock prices of the homebuilders, which have come down significantly over the past several weeks. And valuation multiples remain reasonable.

Plus, investor spirits should be buoyed by the fact that management teams of homebuilders remain entirely optimistic. As Toll Brothers Inc (NYSE:TOL) CEO Doug Yearley stated earlier this year of his company’s positioning, “We are in the early stages of this recovery, and we’re raising prices aggressively.” Regarding all three of these homebuilder stocks, I tend to agree with that assessment.

As a result, homebuilder stocks still look attractively valued and are poised to capitalize on the clear housing recovery. I think investors should hold them with confidence.

The article Are Homebuilders Ripe for Investment? originally appeared on Fool.com and is written by Robert Ciura.

Robert Ciura has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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