Homebuilders: Rejuvenation set to continue into 2020

Seeking Alpha

Left for dead early in the year, homebuilders have sprung back to life this year – surging more than 50% – after falling into a “mini housing recession” in 2018.

After dipping 30% last year, the combination of sharply lower mortgage rates, strong demographic-driven demand, and lower construction materials prices have rejuvenated single-family builders.

Don’t let this year’s performance fool you. Homebuilders remain an unloved sector, still trading at deep discounts to historical and market multiples despite double-digit earnings growth.

Homebuilders have increasingly shifted into entry-level segments where projected demand growth is strongest. Order growth jumped more than 15% in the latest quarter.

Millennials – the largest generation in American history – are coming full-steam into the single-family housing markets over the next decade during a period of historically low housing supply.

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