Housing Stands Tall As Starts Jump 13.7% In October

New residential construction in the United Stated increased more than expected in October 2017, reinstating strength in the housing industry after recovering from disruptions caused by recent hurricanes in the South.

Per the latest jointly released report from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, constructions for new homes increased 13.7% in October 2017 to 1.29 million units (seasonally adjusted annual rate) from the prior month. This also marks the biggest surge in 12 months as housing starts witnessed big gains in single-family homes and apartments.

Also, September's sales pace was revised to 1.135 million units from the previously reported 1.127 million units.

Another indicator of growth, residential building permits, increased 5.9% in October to an annualized rate of 1.297 million from September. This also marks the highest level since January. Single-family home permits increased 1.9%, while that for the construction of multi-family homes jumped 13.9%.

The U.S. housing seems to be on solid ground courtesy of robust economic growth and tight inventory. Consistent job growth along with seemingly high homebuilders’ confidence is adding to the momentum.

Housing/Homebuilding Showing Signs of Confidence

Recently, confidence among homebuilders rose in November to its highest reading in eight months and second-highest since the recession (July 2005), according to the Housing Market Index by the National Association of Home Builders (NAHB) and Wells Fargo (NYSE:WFC).

The index of home builder sentiment, which reflects builders’ perceptions of current single-family home sales and sales expectations for the next six months, rose two points in November to 70 from the previous month. This followed after a rise of four points in October. It is important to note that the index dipped three points in September from August. However, it still remained at a confident level of 64 points as any reading above 50 is considered positive.

The Zacks Homebuilding Industry has advanced 58% so far this year comparing favorably with 15.6% growth for the broader market (S&P 500). The industry has also outperformed the broader market in the last one year, as you can see below:





If we delve deeper, the homebuilding industry falls within the top 21% of the Zacks Industry Rank as a good industry rank further supports growth.

This industry’s three-five year expected earnings per share (EPS) growth rate of 12.3% is better than the broader market’s 9.6% rate.

Major homebuilders like KB Home (NYSE:KBH) , NVR, Inc. (NYSE:NVR) , TRI Pointe Group, Inc. (NYSE:TPH) and Toll Brothers Inc. (NYSE:TOL) , to name a few, are well poised on the bullish fundamentals of the housing market.

While, KB Home, NVR and TRI Pointe sport a Zacks Rank #1 (Strong Buy), Toll Brothers carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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