Homebuilder Confidence Stays Steady In September: 5 Top Picks

The confidence level among the nation's homebuilders for newly-built, single-family homes remained unchanged in September from the prior month on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Although builders remain perturbed with rising costs and continued shortage of skilled labor, a growing economy and rising income along with increasing household formations raise optimism. Notably, any reading more than 50 signals improving conditions.

Shares of homebuilders like KB Home (KBH - Free Report) , NVR, Inc. (NVR - Free Report) , D.R. Horton (DHI - Free Report) , Lennar (LEN - Free Report) and PulteGroup, Inc. (PHM - Free Report) rose 2.5%, 2%, 1.5%, 1.3%, 1.1% respectively, on Tuesday. The exchange-traded fund or ETF, namely iShares U.S. Home Construction ETF (ITBFree Report), which tracks the homebuilding industry, rose on Tuesday, after the news release.

The September 2018 reading was up three points to 67 from the year-ago period. Two of the three HMI components grew in September. Current sales conditions increased one point to 74. Buyer traffic held steady at 49 and sales prediction over the next six months rose two points to 74. Importantly, the HMI gauge of future sales expectations remained in the 70s, signaling that housing demand should continue to grow this year.

Hurricane Florence & Effect on Housing

Florence, the first major hurricane to threaten eastern United States this year, could be damaging for some sectors like restaurant, insurance, and agriculture. NAHB expects this category 1 storm to disrupt some real estate markets. Notably, single-family construction in North Carolina, South Carolina, and Virginia makes up 12% of national production.

That said, homebuilding companies or building product suppliers will remain in focus as cleanup and rebuilding efforts pick pace.

Affordability & Rising Costs Continue to Play Spoilsport

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