3 Housing Market Stocks To Buy On The Dip

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One of the strongest sectors of the economy is housing. Unlike nearly every other asset, it didn’t decline during the depths of the pandemic. In retrospect, this was a harbinger of its outperformance in the ensuing months. Despite recent gains, the outlook for housing remains bullish.

Therefore, investors should consider buying high-quality housing stocks such as Lennar (LEN), Tronox (TROX), and Whirlpool Corporation (WHR) during the recent bout of market weakness.

Rising Home Prices

This is evident from the Case-Schiller US Home Price Index, which has continued trending to new highs and saw no decline during the spring of last year:

Source: FRED

Like any asset, supply and demand are the most important factors. Housing supply remains close to historically low levels.

Source: FRED

Demand is strong due to low mortgage rates, strong household balance sheets, and favorable demographics as Millennials enter their peak buying years. The coronavirus resulted in a short-term surge in demand as well due to people moving from urban to suburban and rural areas, especially with people working from home.

3 Stocks to Buy

Until these bullish supply and demand dynamics change, investors should consider buying housing stocks on weakness. Currently, such an opportunity has presented itself. From Monday’s open to Thursday morning of this past week, the S&P 500 dropped 4%. From these lows, it’s recouped about half of its losses.

It seems likely that this is the culmination of the market’s rotation out of growth stocks. Basically, many growth stocks, and specifically the speculative and frothy ones, have been trending lower since mid-February, while other indices like the Dow Jones and S&P 500 have been making higher highs. Some of the catalysts for the market’s selloff were concerns about rising inflation readings, the S&P 500’s failed breakout above 4,200, and some tax-induced selling with Tax Day fast approaching.

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James Hanshaw 1 month ago Contributor's comment

Good article. LEN is also now into the house rental business.