U.S. Home Price Gains Gather Pace In September: 5 Top Picks
Zacks Investment Research | Nov 26, 2019 08:13PM ET
U.S. home price gains accelerate in September after a long period of decelerating price increases. According to the S&P CoreLogic Case-Shiller U.S. National Home Price Index, U.S. home prices rose 3.2% year over year in September, following a gain of 3.1% in August on a national level.
The 20-City Composite Home Price Index rose 2.1% year over year, after 2.0% gain in August. However, the 10-City Composite Home Price index remained flat with the 1.5% rate of August. Low supply of homes for sale associated with strong housing demand resulted in accelerated price increases.
Momentum Likely to Continue
The strong pricing momentum in the housing sector is likely to continue in the near future. The U.S. housing sector rebounded in October buoyed by a low mortgage rate and a fundamentally stable domestic economy, which is growing for the historically longest 11 years, albeit with some loss in pace.
The housing starts marked the second-highest gain in October while building permits achieved the highest level in more than 12 years. Moreover, new home sales in October came in at 733,000, slightly below the revised estimates of 738,000 in September (original reading was 701,000). However, the figure surpassed the consensus estimate of 706,000.
Turnaround in the housing sector is important since it generates more than 3% of the U.S. GDP. The Fed has reduced the benchmark interest rate by 75 basis points, which has helped the mortgage rate remain low. According to mortgage finance agency Freddie Mae, the 30-year fixed mortgage rate is currently hovering around 4%, well below 4.94% in November 2018.
Our Top Picks
At this stage, it will be prudent to invest in homebuilding stocks with a favorable Zacks Rank. We narrowed down our search to five such stocks. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see Zacks Investment Research
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