Investors finally start betting on homebuilders. D.R. Horton (DHI), the nation’s largest homebuilder, has beat or met estimates in four of the past four quarters, notes Brit Ryle, editor of The Wealth Advisory.
The company constructs and sells single-family detached homes and attached homes, such as townhomes, duplexes, triplexes, and condominiums. It also buys and develops the land that the homes are built on. DHI operates in 26 states and 78 markets in the U.S.
The company has beat or met estimates in four of the past four quarters. The company blew estimates away yet again. But shares only rallied a little bit. Nowhere near the 7%–10% that I’d been hoping for.
But investors are finally starting to realize that those analysts were all wrong about the imminent future of the U.S. housing market. Right now, the economy is perfectly set for a massive rally in that sector. Unemployment is at its lowest level in 17 years.
Millennials are finally starting to look for homes to buy. And falling existing home inventories are already making supply tight and driving prices up. The only thing that might slow a rally some is rising interest rates.
But are people really going to give up on their dreams of owning a house because they have to pay 6% on the mortgage instead of 4%? I doubt that. My parents got a super low rate when they bought the house that I grew up in. And they financed through the seller at around 17%.
All I’m saying is interest rates aren’t going to keep folks from buying. They’ve been way higher before, but homes still sold. And this time won’t be any different. You should be adding shares while prices are down. They won’t stay this low for long. D.R. Horton is still a “Buy.” The limit price is $50, and the 12-month target price is $70.