U.S. Housing Permits Hit Post-Recession High: 5 Picks

While building permits hit a post-recession high, residential starts increased as builders felt confident enough to build more homes throughout the country. And it’s primarily because of low mortgage rates following a series of rate cuts.

Given the positive development in the housing space, we have shortlisted five stocks that are poised to grow. Let’s have a look.

Residential Starts Advance

On Nov 19, the Commerce Department reported that U.S. housing starts jumped 3.8% in October to a seasonally adjusted annual rate of 1,314,000. The October data was not only above the revised September estimate of 1,266,000, but also 8.5% above the October 2018 rate of 1,211,000.

Additionally, housing starts for single-family houses grew 2% due to increase in construction in the West and South. Also, construction of apartment buildings grew 6.8% from September.

Building Permits Rise at Fastest Rate Since 2007

Building permits, a measure for future home building, rose to 1,461,000 in October. The data beat the consensus estimate of 1,390,000 and was 5% higher than the previous month’s revised value of 1,391,000.

Building permits for future growth rose at the strongest pace since May 2007. This year, there has been a bulk gain in permits for apartment complexes, but October’s gain was primarily driven by the single-family housing segment. The segment has grown 3.2% to its highest level since August 2007.

Building permits, by the way, rose 19.5% in the Northeast, which is the highest, though all other parts saw a significant rise.

Low Mortgage Rate to Propel Sale

The lower mortgage rate due to the Federal Reserve’s three consecutive rate cuts this year and a healthy job market have fueled the housing market in the past few months. The U.S. central banks’ rate cut in October lowered the lending rate to a target range between 1.50% and 1.75%.

This monetary easing from the Fed led the mortgage loan interest rates to fall. As per mortgage financiers Freddie Mac, the average 30-year mortgage loan has an interest rate of 3.75%, which is lower than the 4.94% rate in 2018. This cheap borrowing cost has spurred higher demand from buyers.

Buy These 5 Stocks Now

Given the positive growth in housing starts and building permits, we have selected five stocks from not only the home building space but also home furnishing industry as they will also grow with the growth in housing sector in the long run. What’s more, these five stocks carry a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Forestar Group Inc. (NYSE:FOR) is a publicly traded company that engages in the acquisition, entitlement and development of infrastructure for single-family residential communities. The company’s expected earnings growth rate for the current year is 15.2% against the industry’s estimated earnings decline of 3%. The Zacks Consensus Estimate for its current-year earnings has moved up nearly 11% over the past 60 days.

Forestar Group, a Zacks Rank #1 company, has outperformed the Zacks Investment Research

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Written By: Zacks Investment Research