Every investor wants to make informed and profitable housing stock investment decisions. This is easier said than done. Factors like slowed economic growth, increased market volatility, and high inflation urges make it difficult to find undervalued companies offering attractive returns with excellent future earnings prospects.
Though it may sound counterintuitive, with the rate of mortgage reaching a 13-year high of 5.64 percent, some stocks continue to outperform, offering excellent portfolio diversification. Here is a list of the five best housing stocks with superb growth potential.
American Homes 4 Rent
AMH is the 2nd largest single-family rental unit owner in the US. It owns nearly 58,961 properties in twenty-two states.
Their internally managed real estate investment trust (REIT) focuses on acquiring, renovating, leasing, developing, and operating single-family houses as rental properties. It started with this REIT model a decade ago and continues to use it even today.
However, the difference is that it has yet to grow massively. AMH has three big markets in Atlanta, Charlotte, and Dallas. Its market value is $12 billion, and its dividend yield is 2 percent. It has amazing long-term growth potential.
Invitation Homes
It is the largest single-family rental home provider in the US. The company owns 83,093 homes and 3,261 joint ventures. It has solid financials and generates nearly $569 million in revenue in 3 months.
The occupancy rate is 97.5% and focuses on US high-growth markets like Southern California, Atlanta, and South Florida. Currently, the housing stock price is down, which is a great time to invest because investors understand the temporary factors behind the drop (high real estate taxes and minor litigation). The prices are expected to bounce back.
Tricon Residential
Boasting a market value of $2.2 billion with a dividend yield of 2.8 percent, Tricon has nearly 33,000 single-family rental homes across the US. In other words, the company owns 2 percent of the single-family rental homes.
It is expected to grow its rental home portfolio to approximately 50,000 homes by 2024 year-end. The average resident of Tricon rental home has an income of approximately $90,000 and pays at least 23 percent of it to rent.
Moreover, its occupancy rate in the market is between 97 and 99 percent. The business model of Tricon has great potential.
Sun Communities
Sun Communities has a $16.5 billion market value and a 2.7 percent dividend yield. Sun Communities had the best cumulative returns of 336% in the last decade.
Sun Communities is interested in approximately 661 manufactured housing, marina properties, and recreational vehicles. In the third quarter of 2021, it generated revenues of $932.6 million. It also runs a rental program for prospective tenants.
D. R Horton
The company has a market value of $26.1 billion and a dividend yield of 1.2 percent. The price range of homes offered by D. R Horton lies between $200,000 and 1,000,000. Unlike other housing stocks, D. R. Horton offers its rental properties in a bulk sale.
The company’s value was $1.3 billion at the end of June 2022. As more homes are built, the value of the inventory is expected to increase significantly, thereby making D.R Horton housing stocks a great long-term growth potential.
