Thanks to the Federal Reserve's reluctance to cut interest rates and lingering apprehension among homebuyers due to high prices, real estate stocks might not seem like the most attractive investment option at the moment. The prevailing sentiment surrounding real estate appears notably pessimistic compared to previous years. However, there are still some surprisingly profitable opportunities in this sector.
While traditional real estate may be struggling, certain real estate stocks are demonstrating significant gains. Here are three compelling options worth considering, even amidst a sluggish market.
Lennar
Lennar (NYSE:LEN), the second-largest U.S. homebuilder after D.R. Horton (NYSE:DHI), has seen a resurgence in its share price this year. While both firms experienced declines in 2023 amid uncertainty over interest rates, Lennar has outperformed DHI in 2024, with LEN stock up by 12% year-to-date compared to DHI's 5%. Lennar's success is attributed to prevailing trends in home sales, with many homeowners holding onto their properties due to historically low mortgage rates, thereby driving demand for new construction.
Operating in 75 markets across 26 states, Lennar consistently surpasses its competitors in revenue, offering stability and growth potential in the current market. Analysts are bullish on LEN stock, with 11 out of 17 rating it as a buy. Moreover, Lennar has outpaced the wider real estate sector by over 50% in the past 12 months and exceeded analyst earnings estimates in its recent report.
Welltower
Welltower (NYSE:WELL), a real estate investment trust (REIT) focused on senior living facilities, presents another promising opportunity. With the aging population in the U.S., Canada, and the U.K. expected to increase significantly by 2040, the demand for specialized living arrangements is projected to grow. WELL stock is supported by analysts, with nine out of 14 recommending it as a buy. The company's recent acquisitions and strong financial performance further bolster its prospects.
Builders FirstSourceÂ
Builders FirstSource (NYSE:BLDR), the largest U.S. supplier of building products, stands to benefit from the upswing in new housing starts. As new home builders thrive, so do suppliers like BLDR. Despite potential disruptions in the supply chain due to events like the recent bridge collapse in Baltimore, BLDR stock has surged by over 20% year-to-date and nearly 140% in the past year. With positive sentiment from analysts and institutional investors, Builders FirstSource appears well-positioned for continued growth in the building products market.