U.S. home builder stocks with attractive valuations and return on equity which benefit from lower interest rates.
In August, U.S. housing starts jumped 9.6 per cent, well above the 3.2-per-cent forecast, marking their highest level since March, 2022. Building permits also rose 4.9 per cent month-over-month, rebounding from a 3.3-per-cent drop in July. High consumer confidence, a driver of home buying, is adding to this momentum. The CB Consumer Confidence Index reached 103.3 in August, its highest level since March, further fuelling optimism and real estate investment.
To identify value opportunities, we will screen for home builder stocks with a price-to-earnings ratio below 15, seeking those trading at a discount compared with the S&P 500 average of 26.75. Trading Central Strategy Builder offers a back-testing feature that allows users to assess the historical performance of an investment strategy. Utilizing a five-year historical period with quarterly rebalancing, the described screen had a 27-per-cent annualized total return, outperforming the S&P 500 Index, which achieved a 13-per-cent annualized total return over the same period.