We recently compiled a list of the 12 Best Housing Stocks to Invest in According to Analysts. In this article, we are going to take a look at where KE Holdings Inc. (NYSE:BEKE) stands against the other housing stocks.
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.
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.
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).
Aerial shot of a modern real estate development with residential homes.
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.
Overall BEKE ranks 5th on our list of the best housing stocks to invest in according to analysts. While we acknowledge the potential of BEKE 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 BEKE 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.