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Homebuilders: Rejuvenation Set To Continue Into 2020



  • Left for dead early in the year, homebuilders have sprung back to life this year - surging more than 50% - after falling into a "mini housing recession" in 2018.
  • After dipping 30% last year, the combination of sharply lower mortgage rates, strong demographic-driven demand, and lower construction materials prices have rejuvenated single-family builders.
  • Don't let this year's performance fool you. Homebuilders remain an unloved sector, still trading at deep discounts to historical and market multiples despite double-digit earnings growth.
  • Homebuilders have increasingly shifted into entry-level segments where projected demand growth is strongest. Order growth jumped more than 15% in the latest quarter.
  • Millennials - the largest generation in American history - are coming full-steam into the single-family housing markets over the next decade during a period of historically low housing supply.
  • This idea was discussed in more depth with members of my private investing community, iREIT on Alpha. Get started today »

Homebuilder Rankings Overview

In our Real Estate Rankings series, we analyze companies within each of the commercial and residential sectors, focusing on property-level fundamentals and the macroeconomic forces driving overall supply and demand conditions. We then analyze these firms based on both common and unique valuation metrics, presenting investors with numerous options that fit their own investing style and risk/return objectives.

homebuilders(Hoya Capital, Co-Produced with Brad Thomas through iREIT on Alpha)

Homebuilding Sector Overview

In the Hoya Capital Homebuilder Index, we track the 15 largest homebuilders, which account for roughly $80 billion in market value: D.R. Horton (DHI), Lennar (LEN), NVR (NVR), PulteGroup (PHM), Toll Brothers (TOL), KB Home (KBH), Taylor Morrison (TMHC), MDC Holdings (MDC), Meritage Homes (MTH), M/I Homes (MHO), TRI Pointe (TPH), Century Communities (CSS), William Lyon (WLH), Beazer Homes (BZH), and New Home Company (NWHM). Together, these 15 firms will have constructed approximately 200,000 homes in 2019, accounting for roughly a quarter of total single-family deliveries this year. Below we note the regional and price-segment focus of each of these 15 builders.

homebuilders overview

While single-family homebuilding ETFs including the SPDR S&P Homebuilders ETF (XHB) and the iShares Home Construction ETF (ITB) are sometimes viewed as a proxy for the entire US housing market, single-family builders account for only around 15% of total housing-related spending in the average year, as tracked by the Hoya Capital US Housing Index. While a small number of single-family builders including Lennar have made investments towards multifamily development in recent years, these builders remain almost exclusively focused on single-family development. Similar to the commercial REIT sector, due to the high degree of private ownership of assets and companies within the industry, homebuilders represent just a tiny slice of typical broad-based equity indexes relative to their total economic impact.


The US single-family homebuilding sector

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This article was written by

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Build sustainable portfolio income with premium dividend yields up to 10%.

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Visit www.HoyaCapital.com for more information and important disclosures. Hoya Capital Research is an affiliate of Hoya Capital Real Estate ("Hoya Capital"), a research-focused Registered Investment Advisor headquartered in Rowayton, Connecticut. 

Founded with a mission to make real estate more accessible to all investors, Hoya Capital specializes in managing institutional and individual portfolios of publicly traded real estate securities, focused on delivering sustainable income, diversification, and attractive total returns. 

Collaborating with ETF Monkey, Retired Investor, Gen Alpha, Alex MansourThe Sunday Investor, and Philip Eric Jones for Marketplace service - Hoya Capital Income Builder. 

Hoya Capital Real Estate ("Hoya Capital") is a registered investment advisory firm based in Rowayton, Connecticut that provides investment advisory services to ETFs, individuals, and institutions. Hoya Capital Research & Index Innovations is an affiliate that provides non-advisory services including research and index administration focused on publicly traded securities in the real estate industry.

This published commentary is for informational and educational purposes only. Nothing on this site nor any commentary published by Hoya Capital is intended to be investment, tax, or legal advice or an offer to buy or sell securities. This commentary is impersonal and should not be considered a recommendation that any particular security, portfolio of securities, or investment strategy is suitable for any specific individual, nor should it be viewed as a solicitation or offer for any advisory service offered by Hoya Capital. Please consult with your investment, tax, or legal adviser regarding your individual circumstances before investing.

The views and opinions in all published commentary are as of the date of publication and are subject to change without notice. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. Any market data quoted represents past performance, which is no guarantee of future results. There is no guarantee that any historical trend illustrated herein will be repeated in the future, and there is no way to predict precisely when such a trend will begin. There is no guarantee that any outlook made in this commentary will be realized.

Readers should understand that investing involves risk and loss of principal is possible. Investments in real estate companies and/or housing industry companies involve unique risks, as do investments in ETFs. The information presented does not reflect the performance of any fund or other account managed or serviced by Hoya Capital. An investor cannot invest directly in an index and index performance does not reflect the deduction of any fees, expenses or taxes.

Hoya Capital has no business relationship with any company discussed or mentioned and never receives compensation from any company discussed or mentioned. Hoya Capital, its affiliates, and/or its clients and/or its employees may hold positions in securities or funds discussed on this website and our published commentary. A complete list of holdings and additional important disclosures is available at www.HoyaCapital.com.

Analyst’s Disclosure: I am/we are long DHI, LEN, NVR, PHM, TOL, KBH, TMHC, MDC, MTH, TPH, AMH. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Hoya Capital Real Estate advises an ETF. In addition to the long positions listed below, Hoya Capital is long all components in the Hoya Capital Housing 100 Index. It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. All commentary published by Hoya Capital Real Estate is available free of charge and is for informational purposes only and is not intended as investment advice. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy. Real Estate and Housing Index definitions and holdings are available at HoyaCapital.com.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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