Shares of several homebuilders look attractive as the U.S. housing market could strengthen further, Barron’s reported in its latest issue.
With strong demand, lack of inventory and modest annual price gains, industry observers see the recovery continuing for several years unless mortgage rates spike, according to the article.
The Spdr S&P Homebuilders ETF has fallen 9 percent this year. Homebuilder shares recently traded for 10 times 2018 profit estimates, compared to the overall market’s P/E ratio of 17, even though the companies are expected to have double-digit earnings growth this year and next, the article said.
According to Barron’s, shares of Lennar Corp., NVR Inc. and Meritage Homes Corp. look particularly attractive.
Last week, Lennar shares fell 2.6 percent, NVR dropped 3.3 percent and Meritage slid 4.2 percent, as the overall S&P 500 .SPX was off 2 percent.
Home improvement chain Lowe’s Cos. Inc. is also attractive, according to the article. Lowe’s shares fell 12.5 percent last week as the company reported quarterly profit and margins well short of Wall Street estimates.
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