BOSTON (TheStreet) -- The housing industry is healing, but Goldman Sachs analysts recommend that investors steer clear of the rally in homebuilders such as Lennar (LEN - Get Report) and PulteGroup (PHM - Get Report).The SPDR S&P Homebuilders ( XHB) ETF has risen more than 30% over the past three months. Even JPMorgan Chase ( JPM) CEO Jamie Dimon said "housing is at or near the bottom" during an interview on CNBC Monday afternoon. Not so fast, says Goldman Sachs analyst Joshua Pollard. While the housing sector may be gaining its footing, the improvements are lagging valuations. "With homebuilding stocks outperforming the market by 3,500 basis points in the last three months, we would wait for a pullback or a clearer picture that housing is healing quicker than it currently is," Pollard writes. Among homebuilders, Pollard says his team at Goldman prefers PulteGroup because of its turnaround story as well as Toll Brothers ( TOL - Get Report), which he calls best in class. Pollard increased his price target on Pulte to $8, an increase of 23% from his previous target, and he raised his target on Toll by 9% to $24. Pollard also hiked his price targets for several other homebuilders. The price target on KB Home ( KBH - Get Report) went to $7.50 from $6.50. Lennar's ( LEN - Get Report) moved to $18 from $14.50, while MDC Holdings' ( MDC - Get Report) inched up to $20 from $18. Pollard raised his target on Meritage Homes ( MTH - Get Report) to $23 from $18, and increased Ryland Group's ( RYL) to $13 from $11, although he maintained a "sell" rating on Ryland. -- Written by Robert Holmes in Boston. >To contact the writer of this article, click here: Robert Holmes.
More from Opinion
Goldman Sachs: Should You Bet on Its Business Transformation?
Goldman Sachs is a higher-risk, higher-reward play that bargain hunters looking for a potentially successful business model transition story might want to consider.
PepsiCo: The Unlikely Growth Story Continues to Roll
Given the combination of solid execution, strong fundamentals and the diversification benefits of the stock, PepsiCo looks like a compelling buy following the company's strong third quarter earnings report.
There Will Be No Economic Collapse From a No-Deal Brexit
The EU can have Brexit and keep zero tariffs, which ought to be obvious.
Citigroup: Tread Carefully Around Bank Stocks Ahead of Earnings Season
Citigroup will probably have the robustness of global consumer activity to help it support financial results in the third quarter. But the current interest rate environment and a soft institutional services business pose significant challenges for the New York City-based mega bank.
Nike: When Playing Offense Makes Sense, Despite Softening Economy
Nike has been taking the right steps to ensure that it continues to thrive, regardless of the global economic landscape. Following the company's strong earnings report, an investment in the stock still makes sense.