This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Analysts Not Worried About Rates For Builders

NEW YORK ( TheStreet) -- Homebuilder stocks have made many investors happy this past year with the homebuilder index delivering a 48% total return. However, that has changed since May 15 when the group began to slide, losing 10% in value over six weeks. The concern over rising rates has caused many to sell those positions over fears of slowing orders but these analysts seem to agree that the group has more life left in it.

Goldman Sachs (GS) just initiated coverage on the group and splits its opinion. Analyst Eli Hackel thinks there will be modest upside (13%) to the homebuilder stocks over the next 12 months, but doesn't believe that all home builder stocks will rise equally. He advises buying builders that are exposed to markets with the best growth potential, which seems like good common sense. He also suggests buying the higher end because these people will have better access to getting mortgages and selling the lower end of the market. Those buyers will have more difficulty in obtaining a mortgage in this new tightened environment. Hackel does not believe rising rates will slow down the housing rally.

Jay McCanless of Stern Agee mentions higher interest rates in his recent research, but he too believes it won't hurt the overall trend. He thinks the negative psychological effect of rising rates will pull down homebuilder stocks temporarily and he sees this as a buying opportunity. However, the two analysts disagree on which homebuilder stocks are buys. McCanless' top picks include D.R. Horton (DHI - Get Report), Meritage Homes (MTH - Get Report), Pulte Group (PHM), and Ryland Homes (RYL - Get Report). He also has buy ratings on the newly public Taylor Morrison (TMHC)and NVR (NVR).

Hackel's top picks also include Meritage, but he likes Ryland and Toll Brothers (TOL - Get Report). Unlike McCanless, he thinks Pulte is a sell along with Hovnanian (HOV - Get Report). Hackel believes that first-time homebuyers have too much risk associated with them and suggests there could potentially be regulatory changes to first-time buyers. College graduates making more than $120,000 tend to be common purchasers of high end homes, look less likely to be unemployed, and are more likely to buy a home like a Toll Brothers home.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
BZH $17.74 0.11%
DHI $28.25 -0.81%
KBH $15.64 0.13%
HOV $3.59 0.84%
MTH $48.10 -1.11%


DOW 17,698.18 -77.94 -0.44%
S&P 500 2,059.69 -8.20 -0.40%
NASDAQ 4,880.2280 -20.6570 -0.42%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs