After a setback in the first month of 2025, overall housing starts rebounded in February. According to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, the overall housing starts in February climbed 11.2% month over month to 1.501 million units. Although the month’s value indicates a year-over-year decline, the sudden boost since the beginning of the year emanates optimism in the market.
Such a boost in the housing starts in February is driven by the low existing home inventory, especially single-family and comparatively low mortgage rate scenario than January 2025. Per Freddie Mac, the 30-year fixed-rate mortgage in February ranged between 6.89% and 6.76%, down from 7.04-6.96% in January. However, a still-high mortgage rate scenario is a concern as homebuyers are still adjusting to the new normal amid other macro uncertainties threatening the homebuilding industry to some extent.
Despite the ongoing challenges surrounding the housing market, the boost in the housing demand, especially single-family, is expected to bode well for the companies engaged in assisting homebuilding. The positive effect of the housing market trends is substantiated by the stocks, including Quanex Building Products Corporation NX, Ethan Allen Interiors Inc. ETD and Acuity Brands, Inc. AYI, sporting a Zacks Rank #1 (Strong Buy) or carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Apart from the top-ranked stocks mentioned above, the homebuilder Dream Finders Homes, Inc. DFH, indicates a growth trend compared with the other homebuilders in the market. The stock currently has a VGM Score of A, backed by a Growth Score of B and a Value Score of A.
Knowing the Numbers
The overall housing starts in February 2025 grew month over month primarily because of increased housing starts in the Northeast, South and West regions of the United States, partially offset by soft trends in the Midwest region. Compared with January 2025, the housing starts in the Northeast, South and West regions grew 47.4%, 18.3% and 5.9%, respectively. The metric declined 24.9% from last month in the Midwest region.
Contrarily, the housing starts in February declined 2.9% year over year. This decline can be attributed to soft housing start trends in the Midwest and the South regions of the United States. On a year-over-year basis, the overall housing starts in the Midwest and the South regions tumbled 44.4% and 5.6%, respectively. During the said time frame, the metric grew in the Northeast and West regions by 20.2% and 26.2%, respectively.
Being the primary contributor to the overall housing start boost in February, single-family starts increased 11.4% to 1.11 million units, marking the highest pace since February 2024.
Market Scenario & 2025 Expectations
Throughout 2025, homebuyers will be navigating through affordability concerns, which, in turn, is a concern for homebuilders and other associated companies due to construction cost uncertainties stemming from tariff issues and persistent shortages related to buildable lots and labor.
Currently, as of March 13, 2025 week, the 30-year fixed-rate mortgage is 6.65%, which compares with 6.74% as of March 14, 2024 week. This slight downtrend, coupled with a low existing home inventory condition, is a breath of fresh air amid the headwinds mentioned above, suppressing the market trends.
Per Jing Fu, NAHB senior director, “NAHB forecasts that single-family starts will remain effectively flat in 2025 as prospects of a better regulatory business climate are offset by uncertainty on the tariff front. Meanwhile, multifamily construction is expected to remain soft in early 2025 due to challenging financing conditions, before stabilizing in the second half of the year.”
Stocks to Consider
Here is a bundle of stocks that investors can consider amid a trembling market scenario.
Quanex: This Texas-based designer and producer of energy-efficient fenestration products in addition to kitchen and bath cabinet components has lost 18.1% year to date. NX presently sports a Zacks Rank of 1.
The Zacks Consensus Estimate for fiscal 2025 earnings per share (EPS) has moved up in the past seven days to $2.55 from $2.18. The consensus estimate for NX’s fiscal 2025 sales and earnings per share (EPS) indicates 44% and 16.4% year-over-year growth, respectively. The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 115.2%.
Acuity Brands: Shares of this Atlanta-based manufacturer and distributor of lighting fixtures and related components have lost 9.5% so far this year. AYI presently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for fiscal 2025 EPS has moved up in the past 60 days to $17.10 from $17.07. The consensus estimate for AYI’s fiscal 2025 sales and EPS indicates 14.6% and 9.9% year-over-year growth, respectively. The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 3.7%.
Ethan Allen: This Connecticut-based interior design company and manufacturer and retailer of quality home furnishings has lost 4.3% year to date. ETD presently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for fiscal 2025 EPS has moved up in the past 60 days to $2.32 from $2.30. The consensus estimate for ETD’s fiscal 2025 sales and EPS indicates a 3.5% and 6.8% year-over-year decline, respectively. The company’s earnings surpassed the Zacks Consensus Estimate in one of the trailing four quarters, missed on two occasions and met on the remaining one, the average surprise being 0.2%.
Apart from the above-mentioned stocks, investors may focus on this Florida-based homebuilding company Dream Finders, currently carrying a Zacks Rank #3 (Hold). The stock has rallied 3.3% so far this year.
The Zacks Consensus Estimate for 2025 EPS has moved up in the past 30 days to $3.14 from $3.11. The consensus estimate for DFH’s 2025 sales indicates 8.3% year-over-year growth while EPS showcases 6% decline. The company’s earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters and missed on the remaining two occasions, the average surprise being 4.4%.
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