Thursday’s surge in real estate stocks, particularly in the SPDR S & P Homebuilders ETF (XHB) and the iShares U.S. Home Construction ETF (ITB), has sparked speculation about the lucrative opportunities in the housing sector. Both ETFs witnessed a significant increase of more than 10% by the end of the week, marking their best performance in 2024 so far. The optimism was largely driven by expectations that the Federal Reserve might consider lowering interest rates following the release of the consumer price index data. As tech stocks took a hit, investors swiftly redirected their focus to real estate-connected assets, anticipating a favorable environment in a lower-rate scenario. This shift in momentum has prompted a closer examination of homebuilding stocks for potential investment prospects.
By conducting a screening process, CNBC Pro identified the top-performing stocks within the homebuilding sector, based on buy ratings from at least 55% of analysts and an average price target indicating a minimum of 10% upside potential. Among the selected stocks is Toll Brothers, a leading homebuilder that garnered a 55% buy rating from analysts and a projected share price increase of close to 15%. With shares already up approximately 20% in 2024, Toll Brothers has attracted attention for its solid performance and favorable valuation. Wells Fargo analyst Sam Reid highlighted the company as a structural share gainer with attractive prospects, despite the prevailing economic conditions. Reid’s endorsement of Toll Brothers underscores its resilience and growth potential in the current market landscape.
Azek, a prominent housing product manufacturer, emerged as another promising stock on the list, with over two-thirds of analysts recommending a buy rating and a projected share price appreciation of nearly 20%. Building on its 2024 gains of around 14%, Azek has positioned itself as a key player in the outdoor living products segment, earning accolades from Benchmark analyst Reuben Garner. Garner’s endorsement of Azek’s strategic focus on outdoor materials highlights the company’s innovative approach and growth trajectory in response to evolving consumer preferences. As outdoor living experiences a surge in demand, Azek’s commitment to expanding its market presence bodes well for its future performance.
Arhaus, a furniture stock, also stood out in the selection, with a significant portion of analysts giving buy ratings and substantial room for further growth. With shares climbing over 36% in a strong year for the company, Wall Street projects additional upside of more than 16% in the coming year. Barclays analyst Seth Sigman identified Arhaus as a standout player in the retail sector, citing its market share gains as a key driver of success amidst challenging market conditions. Sigman’s endorsement of Arhaus reflects the company’s resilience and competitive edge, positioning it as a promising investment opportunity in the retail landscape.
The recent uptrend in real estate stocks has shed light on the potential for lucrative investments in the housing sector. By closely monitoring top-performing stocks such as Toll Brothers, Azek, and Arhaus, investors can capitalize on the growth opportunities presented by the evolving market dynamics. As the housing sector continues to demonstrate resilience and innovation, leveraging these insights can pave the way for successful investments in the ever-changing landscape of real estate.