S&P 500 housing stocks Lennar and D.R. Horton rallied Wednesday near buy points as mortgage demand jumped 10% and as both stocks received price target hikes earlier in the week.
Total mortgage application volume rose 9.9% for the week ended Jan. 5, compared with the previous week, according to the Mortgage Bankers Association's seasonally adjusted index. Meanwhile, applications for a mortgage to purchase a home rose 6% for the week. However that is still down 16% vs. last year, according to the Mortgage Bankers Association.
Lennar stock jumped 3.5% to 153.32 during market action Wednesday and DHI shares gained 1.8% to 154.53. Both S&P 500 stocks are in three-weeks-tight patterns. Lennar stock has a 156.01 buy point. Investors can use 154.64 as an entry for DHI shares.
The moves around buy points come as Citi on Monday raised its price target on D.R. Horton to 173, up from 140, and kept a buy rating on the shares. The firm also hiked its Lennar stock price target to 170, from the prior 139. Citi also has a buy rating on LEN.
On Tuesday, Lennar increased its annual dividend to $2 per share, up from $1.50 per share, and announced a $5 billion share buyback program.
Meanwhile, fellow housing stock KB Home reported better-than-expected fourth-quarter earnings and revenue late Wednesday. The homebuilder announced earnings dropped 25% to $1.85 per share in Q4 while revenue fell 14% to $1.67 billion. Home deliveries for KBH in Q4 decreased 10% to 3,407 with an average selling price of $487,300, down from $510,400 a year ago.
Ahead of earnings, analysts projected EPS falling 31% to $1.70 with revenue declining 16% to $1.63 billion.
For 2023, KB Home revenue totaled $6.4 billion, down 7% vs. 2022, with earnings falling 23% $7.03 per share.
Warren Buffett Bet On S&P 500 Housing Stocks
KBH stock lost 2.5% after the market closed Wednesday.
U.S. homebuilder stocks rallied aggressively through the first half of 2023, as rising interest rates slowed sales of existing houses, channeling demand into the market for newly built homes.
The big picture in the U.S. is that of a long-term housing shortage. The construction of new homes has not kept pace with the growing population. Rising material costs, supply-chain issues and labor shortages since the Covid pandemic have exacerbated the issue.
The shortage is currently running at a deficit of about 5.5 million homes, according to the National Association of Realtors (NAR). The gap is so large it would take more than a decade to close, NAR says, even if new-home construction accelerates.
Warren Buffett's Berkshire Hathaway bet on the supply-constrained U.S. housing market in 2023. It opened new positions worth a total of more than $800 million in S&P 500 stocks Lennar, D.R. Horton and NVR.
Warren Buffett currently holds a 1.76% stake in D.R. Horton.
DHI stock has a 95 Composite Rating out of 99. D.R. Horton stock also has a 94 Relative Strength Rating. The EPS Rating for the S&P 500 stock is 82. Meanwhile, S&P 500's Lennar stock has a 94 Composite Rating. The stock also has a 92 Relative Strength Rating. The EPS Rating is 82.
Please follow Kit Norton on X, formerly known as Twitter, @KitNorton for more coverage.
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