Ryland Regroups
The Ryland Group, Inc. (NYSE:RYL) is another of the big home builders in the US. However, unlike Lennar Corporation (NYSE:LEN), The Ryland Group, Inc. (NYSE:RYL)’s homes are designed for buyers looking to “buy up.” This is a key factor to consider because these buyers are critical to the housing recovery.
This is because they are less price sensitive than first time buyers, and should not be put off by rising mortgage rates – which remain at historic lows. The company operates in 14 states, and it also plans to expand into the lucrative Dallas market. The Ryland Group, Inc. (NYSE:RYL) has reportedly spent $1 billion buying land in this and other targeted markets.
Finally, The Ryland Group, Inc. (NYSE:RYL) anticipates very robust earnings growth of 189% for 2013. This is a remarkable turn around since the housing market tanked in 2006. The company has operated at a loss every year since then. But their results so far in 2013 are another sign that the housing market recovery is gaining traction.
Toll Brothers Takes the High Road
Toll Brothers Inc (NYSE:TOL) designs, builds, and sells dwellings in luxury residential communities. So this outfit’s market niche is a bit different than both Lennar Corporation (NYSE:LEN) and The Ryland Group, Inc. (NYSE:RYL). But like Ryland, Toll Brothers Inc (NYSE:TOL)’ buyers are less likely to be intimidated by rising rates and prices.
Toll Brothers Inc (NYSE:TOL) has a market cap of $5.5 billion and a P/E ratio of 11.2, which is well below the S&P 500 ratio of 17.7, meaning that there is plenty of room for share price growth. Shares are up by a bit more than 3% so far in 2013. If the market recovery gains steam, the outfit’s share price should continue to rise as long as revenue and earnings growth continues to climb.
The Bottom Line
Each of these home builders has performed quite well in 2013. This should be heartening to home buyers and investors looking to get back into the real estate sector. This is especially so since Lennar Corporation (NYSE:LEN), Ryland and Toll Brothers Inc (NYSE:TOL) operate in different niches – an indication the housing recovery is broad-based.
Of course, many have shied away from housing in the wake of its making like a house of pancakes in 2006. But if the numbers reported so far continue on this trend line, the housing market is on the rise. That said, investors should also consider the challenges still facing the housing sector. Another way to go is investing in a Real Estate Investment Trust (REIT), since these trusts provide a pathway to the real estate market along with risk management.
Kyle Colona has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Kyle is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Home Builders Rise as Housing Recovery Presses On originally appeared on Fool.com is written by Kyle Colona.
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