Source: Tip Ranks —
The U.S. housing market is locked in a paradox of sorts. Homebuilders have too many unsold properties in hand now, but the U.S. is still suffering from a housing shortage. The only apparent way to bring an equilibrium is for homebuilders to turn inconveniences into opportunities during downturns. If this narrative is anything to go by, two stocks that will be in line to benefit most are Toll Brothers (NYSE:TOL) and DR Horton (NYSE:DHI). The correcting housing market may also provide several upsides to the stocks. Let us see what they are.
Build-to-Rent Trend Gathers Steam
The “Pandemic Boom” in the U.S. housing market is about to go bust. High mortgage rates are keeping homebuyers at bay, and there is an oversupply of houses for sale. Also, rents are finally falling back to earth after two years. Experts recall that there is a typical seasonal fall in rental prices during the fall and winter, which means there is more downside for rent left for this year and early 2023. But that is not all that bad for home builders.
The housing stands unaffordable now, and as mortgage rates approach 7%, homebuyers can forget their plans for some more time. When this happens, demand for rental homes is expected to shoot up, leading to higher rental prices once again.
Also, the rising work-from-anywhere flexibility in America is likely to keep the demand for family spaces high. The only other option to have a roof over your head without having to bear elevated home prices and borrowing costs is to rent a property.
All in all, the demand for rental properties is not going to drop so easily, and homebuilders are realizing this quickly. This is why build-for-rent is a growing trend and homebuilders like DR Horton and Toll Brothers are jumping on the bandwagon.
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