Beazer Homes received its second analyst upgrade for the week Wednesday amid a positive mortgage activity report. Beazer stock leapt, while homebuilder stocks at large closed mixed.
The rebound in demand for new homes thus far in 2023 has been fueled by a lack of competition from sales of existing homes in most markets, Wedbush analyst Jay McCanless wrote in a note to clients Wednesday. Owners of existing homes are tending to hold, rather than to sell and move up into mortgages that have become more costly as interest rates rise.
New-home incentives tied to mortgage rates and closing costs have also helped buyers, McCanless says.
Book values — the value of a company according to its balance sheet — for the publicly traded homebuilder stocks "are more secure now" vs. the second half of 2022, when the market expected write-downs, the Wedbush analyst added.
Beazer had been trading according to a discounted book value, which McCanless called unwarranted. He upgraded Beazer Homes to outperform from neutral while hiking his price target on BZH stock from 20 to 32. That's not quite 17% above where the shares traded on Wednesday.
On Monday, B. Riley Securities analyst Alex Rygiel upheld a buy rating on Beazer Homes. He raised the price target on Beazer stock to $28 from $22.
Homebuilders And Mortgage Demand
The Wall Street upgrades for the Atlanta-based homebuilder come amid moderately favorable mortgage trends.
Mortgage rates turned higher last week. But mortgage demand held up because homebuyers sought newly built homes.
Total mortgage application volume rose 3% from the prior week, CNBC reported, citing the Mortgage Bankers Association's (MBA) seasonally adjusted index. Despite still-rising mortgage rates, these applications have increased for three straight weeks to the highest level since early May, the report said.
Homebuyers are looking past existing homes to the new-home market, the MBA said in a news release.
Beazer Stock, Homebuilder Stocks
Shares of Beazer Homes jumped nearly 11% to 27.28 on the stock market today, lifting the stock to its highest price since 2011. Beazer stock is far extended from a 16.31 buy point cleared in April, the IBD MarketSmith chart shows.
The chart also formed a three-weeks tight pattern through June 23. Shares were up almost 17% from that 23.38 entry on Wednesday. BZH stock hit a 52-week high of 27.73
Homebuilder stocks turned lower Wednesday. D.R. Horton, Lennar, PulteGroup and Toll Brothers all rose to highs intraday. Only TOL stock closed with a gain, of 0.3%.
Taylor Morrison Home ended Wednesday's session roughly flat. TMHC stock topped a three-weeks-tight entry, also notching a 52-week high. LGI Homes shed 0.7%.
The stocks reversed as Fed Chair Jerome Powell said at a monetary policy forum in Portugal that several rate hikes may lie ahead, at a possibly aggressive pace.
