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PulteGroup (PHM) Hits a 52-Week High on Housing Uptrend

Zacks Equity Research

Shares of PulteGroup, Inc. (PHM) scaled a new 52-week high of $21.92 on Nov 24, gaining momentum from a string of positive housing data released this month which clearly indicates that the housing recovery is well on track. In fact, shares of the company have increased around 13% this month.

Upbeat Housing Data

Data released by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau on Nov 19, showed that housing starts declined 2.8% sequentially in October to an annualized rate of 1.08 million units.

Nevertheless, housing starts improved 7.8% year over year suggesting that the broader housing trends are very much in place. Moreover, single-family housing starts rose 4.2% in October, clearly indicating that the drop in housing starts in the month was driven by a slide in multi-family construction — a rather volatile sector.

Building permits — a gauge of future constructions — improved for the second consecutive month in October. After improving 1.5% in September, building permits grew 4.8% in October.

Sale of existing homes rose 1.5% in October for the second month per data released on Nov 20. Interestingly, sale of existing homes rose 2.5% from the same month last year — the first year-over-year increase since Oct 2013.

Home builders are also becoming more optimistic as demand for new homes increases with the improving job market and growing consumer confidence. Homebuilders’ confidence, as indicated by the National Association of Home Builders (:NAHB)/Wells Fargo housing market index, rose 4 points to 58 in November — a relief after a drop of the same magnitude in the number last month.

Stabilizing mortgage rates this year, improving job market, moderating home prices and rising inventory levels have paved the way for a steady recovery in the housing sector in the second half after a slump at the beginning of the year.

Though higher than the average rate in 2013, mortgage rates in 2014 are still below historical levels, making housing affordable. According to the Freddie Mac mortgage survey, the 30-year fixed mortgage rate has gone down from 4.43% in January to 4.04% in October.

Moreover, though home prices have been rising in 2014, the rates have moderated since the last year. The median existing-home price rose 5.5% in October but it was much less than the 11.5% increase seen in the same month last year.

Another homebuilder, Lennar Corporation (LEN) also hit a new 52-week high of $47.98 on the same day due to positive housing momentum. The housing market momentum is expected to continue in 2015 as well which could drive prices of homebuilding stocks higher next year.

Other Stocks to Consider

Pulte carries a Zacks Rank #3 (Hold). Better-ranked homebuilders include NVR, Inc. (NVR) and Hovnanian Enterprises Inc. (HOV). While Hovnanian sports a Zacks Rank #1 (Strong Buy), NVR has a Zacks Rank #2 (Buy).

Read the Full Research Report on PHM
Read the Full Research Report on LEN
Read the Full Research Report on HOV
Read the Full Research Report on NVR


Zacks Investment Research