Investors are now eyeing the housing sector as a potential area for lucrative investments, especially after Thursday’s surge in real estate stocks. The SPDR S & P Homebuilders ETF (XHB) and the iShares U.S. Home Construction ETF (ITB) both saw significant gains, marking their best performance in 2024.
The recent optimism in real estate stocks can be attributed to investors speculating that the Federal Reserve may soon cut interest rates, following the release of the consumer price index reading. As tech stocks faltered, traders flocked to real estate-related holdings, anticipating benefits from a lower interest rate environment. This shift in focus suggests a potential trend favoring stocks tied to homebuilding in the near future.
In light of these developments, CNBC Pro conducted a screen for the most-loved stocks in the housing sector. The criteria included stocks in the mentioned ETFs that had buy ratings from at least 55% of analysts and an average price target indicating a potential upside of at least 10%. Among the top picks were:
1. **Toll Brothers**: Analysts have a 55% buy rating on the stock and foresee a 15% potential increase in share price, supported by the company’s status as a structural share gainer and attractive valuation.
2. **Azek**: With two-thirds of analysts recommending a buy, the average price target suggests a 20% climb in share value. The company’s focus on outdoor living products aligns well with emerging trends in the sector.
3. **Arhaus**: Similarly, about 2 out of every 3 analysts hold buy ratings on this furniture stock. Following a solid 36% climb in share price, Wall Street projects further upside of over 16% within the next year.
Analysts have highlighted key factors contributing to their positive outlook on these stocks. For instance, Wells Fargo’s Sam Reid pointed out Toll Brothers’ potential for growth despite challenging macroeconomic conditions, while Benchmark’s Reuben Garner emphasized Azek’s strategic positioning in the outdoor living products market. Barclays analyst Seth Sigman also sees value in Arhaus, noting the company’s ability to gain market share in a competitive retail landscape.
As the housing sector continues to show promise, investors may find opportunities for profitable investments in companies like Toll Brothers, Azek, and Arhaus. By considering the analysts’ recommendations and market trends, individuals can position themselves to capture future upside in this dynamic industry.