In this article, we will take a look at what the future could hold for the US housing market as well as the 12 best housing stocks to invest in according to analysts.
The US Housing Market: An Outlook for 2025
According to the National Association of Realtors, sales of previously owned homes rose 4.8% in November as compared to October. Contracts for these homes were likely signed in September and October as mortgage rates fell to an 18-month low in September but then moved higher in October. Regarding the future of mortgage rates, Compass CEO Robert Reffkin expects mortgage rates to stay around the 6% range for the next two years instead of rates declining to the 5% range in the next year or even the following. In an interview with CNBC, Reffkin states that the market will improve, with pending applications to purchase a home currently up 10% year-over-year. He considers not having enough inventory to be the key issue. While inventory has climbed over the year which is a positive, it is still 20% less than pre-pandemic levels.
On December 18, The Federal Reserve lowered its benchmark rate by another quarter point marking its third rate cut in 2024. However, mortgage rates rose. For the week ending December 19, the 30-year fixed mortgage rate spiked to 6.72%. Orphe Divounguy, Zillow senior economist, joined CNBC to talk about the firm’s 2025 housing market outlook. He stuck to an optimistic view for the coming year pointing towards mortgage rates easing relative to their current levels which is going to drive higher home sales. Regarding increasing home sales, Divounguy thinks new construction will see more activity. New home sales increased in November regardless of the increase in mortgage rates. Meanwhile, existing home sales are expected to rebound but not that much. Thus, the overall housing market will be healthy considering more homeowners starting to come back to the housing market.
Ivy Zelman, Zelman & Associates executive vice president, countered the above optimistic view as she expects more challenges ahead for the housing market. In an interview with CNBC, she mentioned how the entry-level buyer remains troubled due to affordability issues which are worse off with elevated mortgage rates. As the affordability index is about 25% above the trend line for existing homes and 10% to 15% higher for new homes, the market is challenging.
Now that we have reviewed the housing market, let’s move to the 12 best housing stocks to invest in according to analysts.
A wide shot of a residential housing development taking shape with heavy machinery in the foreground.
Our Methodology:
In order to compile a list of the 12 best housing stocks to invest in according to analysts, we first used a stock screener to make an extended list of the relevant companies with the highest market caps. Moving on, we shortlisted the top 12 stocks from our list which had the highest average upside potential. The 12 best housing stocks to invest in according to analysts have been arranged in ascending order of their average upside potential, as of December 27.
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12 Best Housing Stocks to Invest in According to Analysts
12. Independence Realty Trust, Inc. (NYSE:IRT)
Average Upside Potential: 10.22%
Independence Realty Trust, Inc. (NYSE:IRT) is a real estate investment trust that owns and operates multifamily apartment properties across non-gateway US markets including Atlanta, Louisville, Memphis, and Raleigh.
IRT delivers industry-leading operating performance, outpacing industry growth over the past few years as compared to peers in non-gateway and coastal markets. Due to the firm’s attractive location in Sunbelt markets, as well as its investments in value-add renovations and new development initiatives, the momentum for the business is expected to continue.
The high-growth Sunbelt and Midwest regions have shown strong fundamentals with favorable population migration trends due to a lower cost of living, better tax policy, and growing economic opportunity. Additionally, the rent versus buy differential will support rental demand in 2024, with ownership costs 55% to 231% higher than IRT’s rent on average.
In the third quarter of 2024, IRT grew its average occupancy by 90 basis points to 95.4% with a 1.2% increase in average rental rates. The company’s focus on resident renewal and retention during 2024 continues to support occupancy with the third quarter retention of 57%, up from 55.8% in 2Q 2024. IRT also hit a major milestone in October as it received a ‘BBB’ investment grade credit rating from S&P Global Ratings, marking the firm’s second investment grade rating since receiving one from Fitch Ratings in early March.
11. American Homes 4 Rent (NYSE:AMH)
Average Upside Potential: 10.51%
American Homes 4 Rent (NYSE:AMH) is a leading large-scale integrated owner, operator, and developer of single-family rental homes. While the company started by acquiring, renovating, and leasing single-family homes in an undersupplied rental market, it has grown to launch its own homebuilding arm through which it offers new communities across the US.
The company serves as one of the leading single-family rental companies and homebuilders in the country, regarded for quality and integrity. AMH has reimagined single-family living to make leasing a home easy and accessible since 2012. The firm owned nearly 60,000 single-family properties in the Southeast, Midwest, Southwest, and Mountain West regions of the US, as of September 30, 2024.
American Homes 4 Rent (NYSE:AMH) favors from long-term housing tailwinds such as a national shortage of high quality single family homes, limited new construction, single-family rents being a lot cheaper than home ownership costs, and millennials aging into prime single-family living years.
In a favorable market, the company is pursuing a consistent and strong external growth strategy. While AMH, the largest integrated single-family rental builder, has 2,200 to 2,400 deliveries expected in 2024, it opportunistically acquired a portfolio of nearly 1,700 high-quality detached single-family rental homes that overlay well within the firm’s existing footprint.
10. UMH Properties, Inc. (NYSE:UMH)
Average Upside Potential: 16.06%
The real estate investment trust, UMH Properties, Inc. (NYSE:UMH), owns and operates manufactured home communities. The firm has grown from owning 13 communities consisting of 2,675 homesites in 1985 when it went public to owning and operating 139 manufactured home communities with approximately 26,200 developed homesites currently. These communities are situated in states including New Jersey, New York, Ohio, Pennsylvania, Tennessee, Indiana, Maryland, Michigan, Alabama, South Carolina, and Georgia.
Other than boasting an established portfolio, UMH is well-positioned for growth with 3,300 existing vacant lots to fill, and more than 2,200 vacant acres on which to build nearly 8,800 future lots. UMH benefits from both selling affordable homes and providing attractive rental options in a tight housing market. With higher mortgage rates incentivizing homeowners not to move, a limited supply, and the average cost of a manufactured home lower than that of a site-built home, UMH is in a good position.
Currently, UMH is benefitting from its significant exposure to the Marcellus and Utica Shale regions which have the potential to be among the largest sources of natural gas globally. The firm is witnessing increased demand for residential units in the region.
UMH Properties, Inc. (NYSE:UMH) recently witnessed another solid quarter of operating results as it closed the third quarter of 2024. While normalized FFO per share for the quarter was up 9% over the year, the firm was capable of growing same property rental and related income by 8%, same property occupancy by 70 basis points, and same property NOI by 7%, thereby substantially increasing the value of the firm’s communities.
9. Invitation Homes Inc. (NYSE:INVH)
Average Upside Potential: 19.94%
Invitation Homes Inc. (NYSE:INVH) is the largest single-family home leasing and management company in the United States. The firm offers various options for leasing an updated home in a desirable neighborhood. Invitation Homes purchased its first home in Phoenix in 2012, establishing a vertically integrated, single-family rental home company.
Invitation Homes Inc. (NYSE:INVH) has an attractive position as the premier single-family home leasing company in the country. INVH boasts a portfolio predominantly focused on high-growth markets and infill neighborhoods with proximity to jobs, transportation, and schools. Other than attractive locations, the two pillars around which the firm is strategically positioned are INVH’s unmatched scale and its eyes in the market through numerous in-house investment professionals and operations personnel. Differentiated locations, scale, and local expertise have driven the firm’s organic growth outperformance.
While the CEO Dallas Tanner believes in a constructive backdrop for the firm’s future considering the attractive value proposition of single-family rentals compared to homeownership, INVH’s new lease rent growth disappointed investors. It posted negative new lease growth of -1.3% in October 2024 as it faces increasing competition in the Built-to-Rent sector. Consequently, analysts at Jefferies downgraded the stock to Hold from Buy and trimmed their price target to $33 from $39. However, management remains optimistic about the situation deeming the current supply pressures temporary, with new build-to-rent deliveries expected to fall as much as 65% in 2025.
8. BRT Apartments Corp. (NYSE:BRT)
Average Upside Potential: 23.94%
BRT Apartments Corp. (NYSE:BRT) focuses on the ownership, operation, and development of multi-family properties primarily in Sun Belt locations. The firm owns or has interests in 29 multi-family properties with 7,947 units in 11 states, as of September 30, 2024.
BRT has shown decades of demonstrated success in multi-family in its history. The firm’s high-quality portfolio has generated above-average AFFO growth compared to multi-family non-gateway companies. BRT seeks to invest in properties and acquisitions that are well located in areas showing positive indications of growth with catalysts driving employment and housing demand.
A focus on Sunbelt locations offers compelling advantages to BRT Apartments Corp. (NYSE:BRT), driven by the predominance of pro-business states, alongside better population and job growth from migration patterns and business investment. However, the current operational environment in the firm’s combined portfolio is expected to be consistent with other Sunbelt-focused operators with new supply muting new and renewal lease rent growth. The good sign is that this new supply is expected to moderate in 2025 and 2026.
7. Legacy Housing Corporation (NASDAQ:LEGH)
Average Upside Potential: 27.02%
Legacy Housing Corporation (NASDAQ:LEGH) is one of the largest producers of manufactured homes in the United States. It builds, sells, and finances manufactured homes and tiny houses that are distributed through a network of independent retailers and company-owned stores. The firm was established in 2005 and currently concentrates its operations in the southwest and southeast regions of the country.
Legacy Housing Corporation is one of the most vertically integrated companies in the industry, offering a complete solution to its customers. The firm is recognized as a leader and innovator in the manufactured housing industry. Legacy has built itself a strong position by designing family-functional floor plans and offering features that exceed most competitors. With structures ranging from 320 to 399 square feet, the firm is also one of the industry leaders in the tiny house market.
As affordable housing continues to receive popularity and desirability among Americans, Legacy is in an attractive spot to witness exponential growth. The market for Legacy’s products is expected to strengthen into 2025 with housing affordability hovering near all-time lows. Legacy Housing Corporation (NASDAQ:LEGH) received a good response at its 2024 Fall Show in late September as it showcased updated interior and exterior finishes to cater to the preferences of younger homebuyers.
6. Toll Brothers, Inc. (NYSE:TOL)
Average Upside Potential: 30.49%
Toll Brothers, Inc. (NYSE:TOL) was founded in southeastern Pennsylvania in 1967 by the brothers Bob and Bruce. The firm expanded across the US over the years and emerged as America’s luxury home builder. Currently, it operates in 24 states and more than 60 markets across the nation.
Toll Brothers, Inc. (NYSE:TOL) is well positioned with its widespread national footprint, featuring the widest offering of luxury homes and catering to the most affluent customers in its industry.
Toll Brothers continues to demonstrate the power of its luxury brand in its financials. FY 2024 ended up being the strongest year ever for Toll Brothers, marked by a record $10.6 billion of home sales revenue. The home builder closed the FY 2024’s fourth quarter with home sales revenues of $3.26 billion, up 10% year-over-year. The future seems positive for the firm as it has been witnessing strong demand since the beginning of fiscal 2025 which is a great sign for the coming spring selling season in mid-January.
5. KE Holdings Inc. (NYSE:BEKE)
Average Upside Potential: 39.93%
KE Holdings Inc. (NYSE:BEKE) operates Beike, an integrated online and offline platform for housing transactions and services in China. It also owns and operates Lianjia, China’s leading real estate brokerage brand which is an integral part of the Beike platform. The company operates through segments including Existing Home Transaction Services, New Home Transaction Services, Home Renovation and Furnishing, and Emerging and Other Services.
KE Holdings Inc. (NYSE:BEKE) is a pioneer in building the infrastructure and standards to reinvent how Chinese service providers and customers complete housing transactions including existing and new home sales, home rentals, home renovation and furnishing, and other services. The firm builds upon an extensive industry experience regarding business conditions and markets. Since its founding in 2001, it has over 21 years of solid operating experience through Lianjia.
The firm’s business lines stand robust. For the third quarter of 2024, KE Holdings Inc. (NYSE:BEKE) recorded net revenues of RMB22.6 billion, an increase of 26.8% year-over-year, with each of the business lines achieving solid results. The overall revenue increase was driven by the rise of net revenues from new home transaction services and the expansion of the home renovation and furnishing and home rental business. Another positive sign is that transaction volumes on the firm’s platform rebounded significantly in October 2024 which signals better external conditions and a market recovery.
4. Taylor Morrison Home Corporation (NYSE:TMHC)
Average Upside Potential: 41.00%
Taylor Morrison Home Corporation (NYSE:TMHC) is an Arizona-based homebuilder and developer. The company has operations across 20 markets in 12 states and satisfies the needs of diverse consumers including first-time, move-up, luxury, and resort lifestyle homebuyers and renters. The firm’s financial services segment offers mortgage financing, title services, and homeowners’ insurance.
The home builder has a company legacy that dates back over 100 years. It boasts an attractive national footprint spanning some of the highest-growth markets and prime locations across the United States. This concentration in prime locations enhances its portfolio’s through-the-cycle resiliency. Alongside a leading national, regional, and local scale, the homebuilder continues to benefit from a diverse portfolio serving consumers across the homebuyer spectrum while its buyers tend to be well-qualified with financial flexibility.
Against headwinds such as economic uncertainty, interest rate volatility, and hurricanes, Taylor Morrison Home Corporation (NYSE:TMHC) has been resilient. The firm delivered better-than-expected results in the third quarter of 2024. Earnings per diluted share witnessed an over 50% year-over-year growth while home closings revenue increased 26% to $2.0 billion. The firm is benefitting from healthy demand and pricing resiliency across its portfolio as it caters to the needs of well-qualified homebuyers with good product offerings in prime community locations.
Regarding the future of the firm, the CEO Sheryl Palmer reiterated bright prospects in the coming year, stating:
“As we head into 2025, we are confident that our long-standing emphasis on capital-efficient growth will yield another year of strong performance, supported by tailwinds driving the need for new construction and our favorable positioning as a diversified homebuilder”
3. M/I Homes, Inc. (NYSE:MHO)
Average Upside Potential: 47.42%
M/I Homes, Inc. (NYSE:MHO) is a leading US single-family home builder with more than 40 years of experience in building quality new construction homes across the country. While the firm was founded in 1976 by Irving and Melvin Schottenstein, it has materialized the dreams of more than 150,000 homeowners over the years. The firm has a diversified customer base including first-time, move-up, luxury, and empty-nester buyers.
M/I Homes has earned itself solid repute through its focus on superior customer service, innovative design, quality construction, and premium locations. The firm favors from a promising scale and market share, with a diversified geographic footprint across 17 markets in 10 states in addition to a top 5 position in 8 markets and a top 10 position in 13 markets.
M/I Homes, Inc. (NYSE:MHO) delivered a strong third quarter of 2024, marked by solid statistics for homes delivered, revenue, and income. Homes delivered in the quarter rose 8% to a third-quarter record of 2,271 homes. MHO grew revenue by 9% to a record $1.1 billion and pre-tax income by 6% to a record $188.7 million. Moving forward, the home builder will be focusing on affordability, increasing community count as well as market share, and managing cycle time, while continuing its emphasis on core values of customer service, quality, building a better home, and improving diversity.
2. Forestar Group Inc. (NYSE:FOR)
Average Upside Potential: 53.70%
Forestar Group Inc. (NYSE:FOR) is one of the largest residential community developers in the United States which primarily acquires entitled real estate and develops it into finished residential lots for sale to homebuilders. Forestar is a majority-owned subsidiary of D.R. Horton.
Forestar’s strategic relationship with D.R. Horton, one of the largest American homebuilders, presents it with significant built-in demand for current and future lot deliveries. The firm is more geographically diversified than most homebuilders with active projects in 59 markets in 24 states and 95,100 lots controlled, as of September 30, 2024. Forestar successfully delivered over 15,000 residential lots during fiscal 2024 while recording a 1,078% increase in lots sold between FY 2018 and 2024.
As a highly differentiated, pure-play, residential lot developer for the affordably priced single-family home market, Forestar Group Inc. (NYSE:FOR) is demonstrating good operational execution and increased profitability. The firm closed fiscal 2024 with net income increasing 22% and revenues increasing 5%, year-over-year. Over the last five years, the firm invested nearly $6.7 billion in land acquisition and development and delivered more than 70,000 finished lots to local, regional, and national homebuilders. Simultaneously, its return on equity nearly tripled demonstrating meaningful value being delivered to its shareholders.
1. Beazer Homes USA, Inc. (NYSE:BZH)
Average Upside Potential: 53.93%
Beazer Homes USA, Inc. (NYSE:BZH) is a leading American homebuilder. The company is built on a solid family foundation and has been engaging in building homes across the United States for more than 50 years. Beazer is known for its quality homebuilding, craftsmanship, and innovation. The firm is headquartered in Atlanta.
Beazer is well-positioned to drive sustainable value for its shareholders in the years to come. With industry-leading energy-efficient homes, a growing lot position, an experienced operating team, and a healthy balance sheet, the firm is poised to grow. Currently, the firm is making solid progress towards its goal of over 200 active communities by fiscal year-end 2026, with its active community count of 162 at the end of fiscal 2024.
Fiscal year 2024 was challenging for Beazer Homes USA, Inc. (NYSE:BZH) but the firm successfully closed the year with its active communities up 20.9% year-over-year. Homebuilding revenue was up 22.1% year-over-year for the fourth quarter while it climbed 4.3% for fiscal 2024, as compared to fiscal 2023. Beazer is benefitting from its growing community count and an improvement in sales pace. The firm is optimistic about the coming fiscal year and expects further expansion of its community count to result in revenue growth and double-digit return on capital employed.
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