Annual price growth is reaching record highs and inventory continuing to fall. Sellers are elated as they have the opportunity to put their house on the market and receive multiple offers within the first 24 hours.
The fall housing market is already more active than normal as buyers have to act more quickly to grab their dream homes. And still in September more than 6 million households failed to make their mortgage or rent payments. With interest rates this low it just makes more sense to buy than to rent. Builder sentiment is at an all-time high.
According to Bankrate, the 30-year fixed mortgage has dropped to 3%. For a 15-year fixed mortgage, that rate is down to 2.4%.
Combine this with the Coronavirus causing people to reconsider where they want to live and the amount of space that they need. They US housing market is becoming a real bright spot even in this still uncertain economy.
Check out the following from the St. Louis Fed FRED database.
The blue line shows the number of building permits authorized. The red line shows the number os actual housing starts. Both are getting close to their pre-March levels.
So, what about the current election?
A blue wave might mean that we see the Fed hike rates sooner than expected. We’re talking about 2023 instead of 2024. Which means even less time to get in on these mortgage rates.
Biden also talks of injecting more than $600 billion into the housing market with tax credits. That will only do one thing…exacerbate the existing problem of low inventory.
So where do you put your money if you want to get in on this housing trend?
D. R. Horton Inc (NYSE: DHI) has been the largest homebuilder by volume in the United States since 2002. The company has operations in 88 markets in 29 states across the US. Its diverse brand portfolio includes homes ranging from $100,000 to $1,000,000 ensuring a home for any buyer type.
The company works hard to be the leader in all markets. Even last month, the company announced the acquisition of Braselton Homes, the largest homebuilder in Corpus Christi, Texas.
D.R. Horton Inc just announced its fourth quarter earnings this morning and reported better-than expected quarterly orders. For the three months through September, signed home contracts rose 81% from a year earlier. Orders increased in all of the company’s regions and more than doubled in the Southwest.
Net income for the quarter increased 64% to $829 million and net sales orders increased 81%.
It also helps that D.R. Horton is the biggest in the business. That means it can get ahead of the competition because it starts construction on many homes without having specific buyers lined up. These are great for buyers who are trying to move into a place right away.
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The company is also large enough to negotiated better prices for materials in this tough economy and rising construction costs.
Plus, a recent share correction has created a buying opportunity.
Over the past few weeks, shares have taken a slide. And for what reason? The industry is charging ahead, low mortgage rates aren’t going anywhere and the company projects revenue of $24-25 billion for the 2021 fiscal year.
It seems to me there’s some money to be made here throughout the next year. And if you want to cash in on this trend D.R. Horton is the one to add to your portfolio.