Insider Monkey

List of Homebuilder Stocks Sorted By Hedge Fund Sentiment

Fahad Saleem
14 min read

In This Article:

In this article, we will take a look at the list of homebuilder stocks sorted by hedge fund sentiment. To see more such companies, go directly to 5 Best Homebuilder Stocks Sorted By Hedge Fund Sentiment.

Increasing mortgage rates and the global macro uncertainty are hammering the US housing market. Fitch recently said in a report that the mortgage rate volatility is expected to worsen the slowdown in the US housing market in 2023. The firm revised its projections for the US housing industry to reflect this downturn. Fitch now expects US housing starts to drop 20% this year, compared to its previous forecast of an 11.9% decline.

While housing starts jumped 9.8% in February this year, a surprise, Fitch expects the mortgage rate increases recorded after February will affect the industry during the rest of the year.

Fitch also said that homebuilders are expected to report median sales declines of 16%-18% for 2023. These declines will be driven by a slowdown in home deliveries and low home prices.

Fitch expects most homebuilding companies to see EBITDA margins decline of as much as 800 basis points "as lower operating leverage and higher incentives are only partially offset by lower costs for certain building products like lumber."

The sales jump in the housing market experienced earlier this year pointed out in the Fitch report was mostly due to the discounts and offers given by sellers who are spooked by a rapid decrease in demand. A report by Redfin said that in the latest market a house "that's not perfect may stay on the market for three to four months if the seller doesn’t throw in something to sweeten the deal.”

However, on a long-term basis, the US housing and homebuilding market remains promising. There is a shortage of houses in the US, driven by a slowdown in construction activity by homebuilders who remain cautious due to the current environment. Another factor causing the inventory crunch is the fact that most people refuse to put their house on the market in the current environment where offered prices are low. A report by Bloomberg said that to keep the new-home pipeline on par with 2019 levels, homebuilders will need to increase housing starts by around 20%.

Data also suggests that the slowdown in the market might be temporary and home prices will rebound sharply. A Bloomberg report earlier this month quoted a survey from Pulsenomics, which indicates that home prices in the US will begin to see a rebound in 2024 and will continue to increase through 2027. The survey included 107 respondents. According to the results, home prices are expected to fall 2% nationally this year. They will gain about 1.2% in 2024. The real rebound will begin after that, with prices expected to increase 4% annually through 2027.

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