3 Residential Construction Stocks To Avoid As Sales Of New Homes Drop

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The housing market is cooling off as demand falls with rising prices. This is not surprising based on recent earnings report from homebuilders. Sales of new homes in the United States declined in June, dropping down to the lowest level since the initial month of the ongoing pandemic.

It is clear that many of those interested in buying a home are now willing to wait out the market. It is quite possible that the end of the nationwide eviction ban and the mandatory resumption of mortgage payments will move the pendulum back in favor of homebuyers.

The plain truth of the matter is home prices increased much too quickly, largely because so few homes were on the market this past year. If the pandemic fully ends at some point in the second half of 2021, homeowners will feel more comfortable selling, ultimately bringing the housing market back to equilibrium.

Below, we provide a look at three residential construction stocks investors should avoid as the housing market begins to cool. Those stocks are as follows: Toll Brothers (TOL), NVR (NVR), and D.R. Horton (DHI).

Toll Brothers, Inc. (TOL)

TOL constructs single-family and attached-home dwellings. The company also builds master-planned luxury communities and high-rise communities. These buildings are primarily constructed on land owned and developed by the company. TOL’s communities are located in more than half a dozen states. The stock has a forward P/E ratio of 10.06 and has been recently trading at around $59.27. TOL’s beta is 1.54.

TOL has a grade-D POWR Rating. The stock has a grade of C in the Growth, Stability, Value, and Momentum components. Click here to find out how TOL fares in the Quality and Sentiment components of the POWR Ratings. Of the 24 stocks in the Homebuilders segment, TOL is ranked second last, slotting in at number 23 overall. Investors who would like to find out more about the stocks in this space can do so by clicking here.

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