We recently compiled a list of the 10 Best Home Builder Stocks To Buy Now. In this article, we are going to take a look at where Tri Pointe Homes, Inc. (NYSE:TPH) stands against the other home builder stocks.
Lowering Mortgages: A Sigh of Relief for the Housing Market?
Mortgage rates have dropped for six straight weeks to their lowest since February 2023 as the 30-year fixed-rate mortgage averaged 6.20% in the week ended September 12. While many experts believe that these rates will be in the 5% range by 2025, the gesture seems to be motivating for all those looking to buy a house but have long been priced out of the market. In an interview with CNBC, Bess Freedman, CEO of Brown Harris Stevens, mentioned how the anticipated Fed rate cut could be beneficial for the housing market but its effect would unfold gradually. The long-awaited move is also likely to help sellers escape the mortgage lock-in effect and finally put their houses on the market. The mortgage lock-in effect refers to existing homeowners holding onto their houses since they will have to pay a higher rate on a new house.
Diane Swonk, KPMG chief economist, talked about the downside of this positive news with CNBC saying that it couldn’t spur buyer activity a lot. In the existing housing market, there is a lot of pent-up demand especially with 12,000 millennials a day turning 35 and moving into their peak home-buying years. Many buyers are still waiting for mortgage rates to go even lower in the hopes of the Fed rate cut. Other than that, home affordability being at its worst since 2006 is further pushing out potential buyers. The root cause in this case remains decades of under-building which has restricted the prevailing supply. According to Swonk, the US zoning laws need to be rethought to solve this housing crisis
Therefore, homebuyers and homeowners in the current tight housing market tend to see a welcome sign in the form of lowering mortgage rates ahead of the rate cuts from the Federal Reserve. However, the market continues to be plagued with persistent supply shortages and affordability issues.
Our Methodology:
In order to compile a list of the 10 best home builder stocks to buy now, 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 10 stocks from our list which had the highest number of hedge fund holders. The 10 best home builder stocks to buy now have been arranged in ascending order of their hedge fund holders, as of Q2 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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. Regardless of the price point or life stage, the company creates homes and neighborhoods to offer a premium lifestyle to its customers. The homebuilder has operations in 12 states and the District of Columbia.
Tri Pointe Homes, Inc. (NYSE:TPH) is a recognized leader in innovation, energy efficiency, and environmentally friendly home designs. The home builder operates as local specialists on a national scale. It has a diversified portfolio of markets across the US which represents a broad market reach. The firm has a major supply of high-quality land assets in strong housing markets. To expand revenues, it leverages the long-standing relationships with local land owners and subcontractors in its local markets.
While the home builder focuses on expanding scale in existing markets while creating a foundation for growth in 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.
Tri Pointe Homes, Inc. (NYSE:TPH) serves as a growth company with local market expertise and national reach as well as a strong balance sheet. As of Q2, the stock is held by 35 hedge funds thereby ranking as a top home builder stock to buy now. The largest shareholder in the firm is Balyasny Asset Management.
Overall TPH ranks 5th on our list of the best home builder 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.