We recently published a list of 10 Best Residential Real Estate Stocks To Buy. In this article, we are going to take a look at where Tri Pointe Homes, Inc. (NYSE:TPH) stands against other best residential real estate stocks to buy.
Home Buyers Have More Bargaining Power than Sellers, Says Economist
The rate hikes which started in March 2022 as a battle against inflation are coming to an end as the Federal Reserve finally decided to cut rates for the first time since 2020. The rate cuts were kicked off with a half-percentage point reduction on September 18. This long-awaited move lowered rates to about 4.875%, at the midpoint. With an optimistic view in mind about inflation cooling off, the big rate cut will be catering to the employment slowdown. The news just doesn’t end here since the officials have pointed to another half-point reduction before the year’s end.
For the housing market, the big rate cut could be taken as a signal from the Fed to reverse the mortgage lock-in effect but the extent of easing matters. While an aggressive reduction in rates will reduce financing costs, create an inventory of existing homes, and reduce pressure on home prices, a gradual reduction won’t be of much value for the homeowners who are holding on to their early-pandemic low mortgage rates. The anticipation of a rate cut at the September Fed meeting has brought down mortgage rates to as low as their lowest since February 2023. However, the dropping mortgage rates are a double-edged sword as they could potentially raise the demand so much thereby making home buying even harder.
In an interview with CNBC, Senior Economist Orphe Divounguy from Zillow emphasized the impact of rate cuts on housing affordability. Although affordability remains a challenge, the market is improving. In his opinion, the best time to act for home buyers is right now as the current scenario offers them a perfect entry point with more options and bargaining power being somewhat shifted from the sellers to the buyers. The number of active listings on the real estate platform has gone up by 22% since last year. Although short-term rates are expected to decline, longer-term rates like mortgage rates could remain at the current level. He expects more buyers than sellers in the market with improving affordability. Sellers will also be in good shape as well-priced and well-marketed homes are selling in just 20 days, according to company data.
With that being said, let’s move to the 10 best residential real estate stocks to buy.
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An aerial view of a neighborhood, showing newly constructed homes in a cul-de-sac.
Tri Pointe Homes, Inc. (NYSE:TPH)
Number of Hedge Fund Holders: 35
Tri Pointe Homes, Inc. (NYSE:TPH) is one of the largest home builders in the United States. The publicly traded company has operations in 12 states and the District of Columbia. The home builder has been engaging in the construction of premium homes and communities with deep ties to the communities it serves.
Tri Pointe Homes, Inc. (NYSE:TPH) is a recognized leader in innovative design, energy efficiency, customer experience, and environmentally friendly business practices. The home builder has created a diversified portfolio of markets which extends its market coverage. Apart from the national reach and local market expertise, the firm has a significant supply of high-quality land assets in strong housing markets.
While the home builder focuses on expanding scale in existing markets while creating a foundation for organic growth in 3 new markets, it drives a commendable performance. With a 38% year-over-year increase in home sales, the firm closed a successful second quarter. Net income and diluted earnings per share witnessed a rise of 94% and 108%, year-over-year, respectively. The firm benefitted from the strength of demand in its core markets with a strong buyer profile which financed with its mortgage company.
While the traffic and orders improved throughout July with mortgage rates dropping below 7%, the firm will be balancing pace and price to meet its overall sales objectives in the typically slow summer months. The firm is poised to grow with favorable demand trends for new housing among millennials and Gen Z, land availability, and as labor resources continue to be a strength. It is fueling further growth and geographic diversification through penetrating Coastal Carolinas, Orlando, and Utah.
Tri Pointe Homes, Inc. (NYSE:TPH) serves as a strong company with local market expertise and national reach as well as a strong financial performance. As of Q2, the stock is held by 35 hedge funds.
Overall, TPH ranks 6th on our list of 10 best residential real estate stocks to buy. While we acknowledge the potential of TPH as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than TPH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
